Maximize Pre vs. After Tax Dollars

Am I making the most of pre-tax dollars vs. after tax dollars?

This is really the crux of tax planning and a good measure of whether you are getting the right tax planning advice. Take a look at this slide here. This slide incorporates the tax rates most small business owners, independent contractors and self employed persons face. It shows income taxes for the state of MO which are about middle of the road as far as state income taxes run. What it demonstrates is that pre-tax dollars can purchase about 35% to more than 50% of goods and services than after tax dollars. That is a huge difference. So every time you spend after tax dollars when you could have been spending pre-tax dollars means you are losing money. Now you wouldn’t want to pay $45,000 dollars for a car that you get for only $30,000 would you? What about your kids braces? Would you rather pay $10,000 or $6,500? What about your utility bills? Would you like to pay 35 to 50% more for those? What about your retirement? Would you rather retire with $2 million or less than $1.3 million? The point is these numbers make a huge difference in your standard of living and quality of life.