Imagine that you saved every penny of your gross income beginning on January 1 of this year. By what date would you have saved enough to pay your entire federal, state, and local taxes for the year? That date is your Tax Freedom Day. In a sense you work for governments until that date, for yourself afterwards.
The date varies depending on the state in which you live. It comes later if you live in a state with a high state income and/or sales tax, earlier if you live in a state where these taxes are lower. For the nation as a whole Tax Freedom Day in 2013 is April 18, or three days after the deadline for filing your federal income-tax return.
The date is determined by dividing the total taxes Americans will pay this year ($4.22 trillion) by the total income they will receive ($14.35 trillion) and then multiplying the result by 365 days. The answer is 108 days into the year, which is April 18.
Most of us would like to advance the date of Tax Freedom Day. How can we do that? We could move to a state with lower taxes—probably not practical—or we could reduce taxable income. The easiest way to reduce taxable income is to increase deductions. The problem is that many deductions decrease the amount you have left to spend. The challenge is to advance your Tax Freedom Day by lowering your taxes—and adding the tax savings to your spendable income.
Fortunately, we offer life income plans to accomplish this objective. Depending on your stage of life and risk tolerance, the income can be fixed or variable with growth potential. Because a charitable deduction is allowed, you will need fewer days of income to cover your taxes for the year, and chances are the payments you receive will be higher than the interest or dividends you earned on the assets you transferred. An added benefit: You get to choose the purpose for which your money is ultimately used.