TAX BENEFITS

STUDENT NAME

AFFILIATION

DATE

Mr. Macdem is taxed every year and does not understand the concept, because he gains little from what he earns. As a general manger he opts for more but his company does not offer the 401k, which is a retirement plan which is sponsored by an employer (Mamorsky, 2015).

To gain tax freedom one has to access ways to invest the money without losing it. In the case his company was tax compliant ,section 125 insures that an employer deduct premium pretax an set aside pretax funds towards heath assumability per the case he can open a health saving account that is tax free on medical expenses upon withdrawals.

In a health saving account (assuming his monthly earning), if he invest in health care he can be free from tax. Let’s say his gross per month is $4000,pretax is 280 ,this shows that his Taxable income will be $3720.State taxes will deduct an approximate of $1,103 making his net pay $2,617 but at the end of the month he will have $280 more as per heath care benefits as reimbursement(If he does not use his medical care service).Macdems income will be $2,897.Based on this health care plan ,he can increase his income by $1,711 as compared to, not having a HSA .Spendable income increases and ensures he saves more and reduces tax(Mamorsky, 2015).Pretax Contributions increase the chance to save and assist in pre-retirement. Increase in contribution reduces the tax burden and due to HSA being tax defer d this offers control in retirement assets. All this is based on the fact that Macdems Company does not have an elaborate plan for employee. Investment without being taxed could be in the form of exchange trade funds, index funds that have no tax liability. To increase his investment Macdem has to have an efficient plan to reduce tax through pretax health care system.

PS(The above calculations are based on assumptions,as we cannot asses his true income and deductible tax.)

Referenc

Mamorsky, J. (2015). Law Journal Press (Revised ed.).