How Filing Your Taxes Can Uncover Hidden Income Streams
Hands up if you dream of running your own business.
Perhaps making some money on the side of your 9-5 job? Looking for a way to be your own boss? Pay off your mortgage? Fund that vacation you’ve been planning for years.
While there are a ton of posts and guides and information out there that tells you about the hustle and affiliate marketing and all that jazz, the answer to more income and more freedom could lie in something you may have actually ignored for most of your life.
We’re talking about taxes, and it’s time you start to see them for how they are.
We often view taxes as a burden – an unwelcome drain on our hard-earned money.
But what if we saw tax season as an opportunity instead?
A chance to unearth hidden income streams and bolster our overall earnings?
I’ve learned that by carefully examining our financial situations and taking a proactive approach; we can unlock income potential we never knew existed – all while keeping our tax liabilities in check.
And it’s what we’re talking about today in this guide to using taxes as a way to produce income and potentially change your life.
The Power of Expense Tracking
Let’s start with the basics.
According to the IRS, approximately 30% of taxpayers itemize deductions on their tax returns. By keeping detailed records of your expenses, you can make the most of the deductions available to you and lower your tax liability.
Long story short, when you pay your tax correctly, you could actually be saving money that can then go back into your pocket to be spent on whatever you want.
It’s all about knowing what to look for.
The first step to unearthing potential income sources is taking a deep dive into your expenses.
Maintaining a meticulous record of your costs can help you identify deductions you might have missed.
For example, if you’re running a home-based business, you could claim deductions for your home office, equipment, and even utilities.
From here, it’s time to discover any potentially hidden deductions relevant to you.
The tax code is brimming with deductions and credits that can save you money, such as student loan interest deductions, childcare expenses, and energy-efficient home improvement deductions.
Got solar panels in 2020 or 2021? You could get 26% of what you paid back in tax credits.
It’s all about knowing what to look for, although this changes often and depends on your state. You’re going to need to do your research.
By tapping into these potential savings, you can reduce your tax liability, freeing up cash to invest in new income-generating ventures.
Supercharge Your Retirement Savings
Retirement accounts, like 401(k)s and IRAs, offer tax advantages to help you grow your wealth. If you’re not using them, then you’re missing out on what could be a comfortable retirement.
That’s shocking, especially when involvement in these plans helps you save money on your tax and set yourself up for a bright and happy future where you don’t have to think about work.
That’s because when you make contributions to these accounts, they’re often tax-deductible, lowering your taxable income and saving you money on taxes.
Plus, investments within these accounts grow tax-deferred, allowing your money to compound more efficiently over time.
When you’re proactive and take advantage of tax-deferred retirement accounts like 401(k)s and IRAs, you can significantly increase your long-term savings and financial security.
Look into your options!
Health Savings Accounts (HSAs): A Hidden Gem
And as a bit of a final note, while we talk about financial plans and options before we move onto the more creative ways to make money with a knowledge of how tax works, let’s talk HSAs.
HSAs are tax-advantaged accounts designed to help individuals save for future medical expenses. Contributions are tax-deductible, and the funds grow tax-free.
Withdrawals for qualified medical expenses aren’t taxed either. Just like all over financial plans, utilizing an HSA can help you save for future healthcare costs while reducing your current tax liability.
Turn Your Hobbies and Skills into Income Powerhouses
Okay, with an understanding of the financial plans available to you, now it’s time to get a little more personal with it.
When you have an understanding of how tax works, you unlock the door to what’s possible when it comes to making and managing your money. After all, tax is unavoidable when it comes to making money, so if you’re struggling to understand what it all means, you could end up holding yourself back from what you want to do in life.
Our courses and expert guidance detail everything you need to know about tax in an easy-to-understand and proactive way. With a clear understanding, even if you have no experience already, you’re free to work in this work with complete confidence in yourself, knowing how the system works.
Here are some examples of how and why this is so important.
Freelance or Consult: Flexibility and Financial Rewards
If you have a unique skill set or expertise, consider offering freelance or consulting services.
This is an excellent way to supplement your primary income while enjoying the flexibility of working on your terms. Plus, certain business expenses related to your freelance or consulting work can be tax-deductible, further reducing your tax liability.
Monetize Your Passion for Personal and Financial Fulfillment
A study by TeamStage found that the gig economy is expected to grow to 50% of the U.S. workforce by 2027.
That’s people working as their own boss for companies, whether they’re offering services, products, or expertise, and it means there’s a growing demand for people to monetize their skills and hobbies.
By identifying your unique talents and exploring ways to generate income from them, you can create a more diversified and fulfilling financial future.
And it really doesn’t matter if you’re an expert in your field, have a hobby you love, or even pick up something new for the first time; there are endless income-generating opportunities out there.
Even if you were to do our Takeaway Tax course, you learn everything there is to know about tax and sell tax services to other people and businesses who maybe don’t have the time or interest.
And with average Tax Advisor salaries hitting around $77,300 a year, it’s clearly a lucrative opportunity.
That being said, don’t be afraid to transform your hobbies and passions into income-generating opportunities.
For instance, if you’re a photography enthusiast, sell your photos online, offer photography classes, or create a blog or YouTube channel to share your expertise. Similarly, if crafting is your passion, sell your handmade items on platforms like Etsy or at local craft fairs.
Monetizing your hobbies generates additional income and provides personal satisfaction and a sense of purpose. And when you understand how the tax behind it all works, you’ll be far more confident in managing your finances.
Diversify Your Income with Smart Investments
Did you know the average dividend yield of S&P 500 companies is around 1.5% to 2%?
This means that by investing in dividend-paying stocks, you can generate a passive income stream while also participating in the potential capital appreciation of the stocks.
And that’s an interesting way to make money.
Creating an additional income stream is possible by investing in dividend-paying stocks – companies that distribute a portion of their earnings to shareholders, usually on a quarterly basis.
By incorporating dividend stocks into your investment portfolio, you’ll generate passive income and potentially benefit from capital appreciation.
And then there are ISAs.
ISAs, or Individual-Savings Accounts, are another way to invest and save your money without paying any tax. Sure, there are variations of this. Some you pay tax on the interest you earn, and some you don’t, but putting your money into these (especially if you can with your workplace), means you’ll save money, and you won’t pay tax.
When you withdraw the money at a later date, you’re then in the green.
Long story short, look for opportunities to invest your money that can give you a tax allowance.
Stop buying stuff you don’t need and throwing your hard-earned money, and instead, make your money make you money.
Put it this way, if you save $10,000, put it in a 5% interest savings account, add $500 a month, and then repeat for 40 years, you’ll have $836,594. Just sitting there.
Pay yourself a monthly wage, and you’re set for life.
This is how you make your money work for you by setting yourself up for a bright future.
Knowledge is Power: Stay Informed and Adapt
Wrapping everything up, you should clearly understand that there are endless ways to use tax knowledge to better yourself and your financial situation, and it really does come down to what you know.
That said, make sure you’re keeping a finger on the pulse of tax law changes.
Tax laws are in a constant state of flux.
Staying informed about these changes is crucial for optimizing your income and tax strategy. Regularly reviewing tax regulations and consulting with a tax professional can help you identify new deductions, credits, and income opportunities that may be available to you.
And if you’re using the Takeaway Tax University, then don’t worry. All the content is updated to reflect any changes, and you’ll be notified when it does, ensuring you never miss out on crucial information.
And it’s crucial that you start now.
A report by the World Economic Forum estimates that by 2025, about 50% of all employees will need reskilling to adapt to the changing job market. With the modern rise of AI and the increase in technology, this could be even quicker than predicted.
By committing to lifelong learning, you can stay ahead of the curve and capitalize on emerging income opportunities in the ever-evolving world of work.
As the world of work evolves, it’s essential to continuously update your skills and knowledge.
This can open up new income possibilities, such as launching a side business, transitioning to a more lucrative career, or even creating a passive income stream through investments.
By embracing lifelong learning, you’ll be better equipped to adapt to economic shifts and seize new opportunities as they arise.
Taxes don’t have to be a burden.
In fact, they can serve as a catalyst for discovering alternative sources of income. By optimizing your deductions, diversifying your investments, utilizing tax-advantaged accounts, and turning your hobbies and skills into income, you can create a more secure financial future.
Stay informed and adaptable, and you’ll be well on your way to transforming tax season into a time of growth and opportunity.
Remember, every tax season presents new growth opportunities, both personally and financially.
Approach it with the right mindset and a willingness to explore hidden income streams, and you’ll find that tax time can be a valuable period of introspection, innovation, and newfound prosperity.
Ready to get started with your own journey into the world of tax?
Check out Takeaway Tax University – your one-stop shop for everything you need to know about tax, all in the palm of your hand.
There’s never been a better time to get yourself future-ready.
July 20, 2023
June 15, 2023