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gatime
Joined: 17 Feb 2006
Posts: 28
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| Posted: Wed Sep 06, 2006 7:26 pm Post subject: tax question |
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me and mooma will avg around 280k this year,accountant says will
have 2 pay around 36k in fed,soc,state tax we dont own a house
does that sound fair 2 u? |
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Rawlco
Joined: 25 Jan 2006
Posts: 1166
Location: Central Maine
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| Posted: Wed Sep 06, 2006 7:53 pm Post subject: |
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What does owning a house have to do with it? :?
I will assume that is $280,000 gross before expenses. I imagine that you may have $180,000 in business expenses or so, leaving $100,000 in personal income.
Just off the top of my head:
15% self employment tax for social security and medicare = $15,000
Federal income tax at about 25% tax bracket (estimated) = $25,000
State income tax = I don't know
So I come up with $40,000 in taxes so far. When you make money the government always has their hand out.
Now you could discuss tax management strategies with your accountant, or you can take a vacation for the rest of the year so you don't earn as much. :lol: |
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Bigmon
Joined: 13 Jan 2006
Posts: 703
Location: S. Cal.
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| Posted: Wed Sep 06, 2006 8:58 pm Post subject: |
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| You can also set up a pension plan for yourself and write some of it off. |
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gatime
Joined: 17 Feb 2006
Posts: 28
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| Posted: Wed Sep 06, 2006 10:33 pm Post subject: |
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| thanks, just checking to make sure that my accountant is right. I thought she might have been related to George when she threw them figures out at me. If you know what I mean. :lol: |
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GMAN
Joined: 13 Feb 2005
Posts: 9878
Location: Tennessee
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| Posted: Thu Sep 07, 2006 6:34 am Post subject: |
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| If you own a house and have it financed, you can deduct the interest expense and taxes. It can really help your tax bite. :wink: |
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Rev.Vassago
Joined: 04 Apr 2006
Posts: 6187
Location: The other side of the coin
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| Posted: Thu Sep 07, 2006 8:01 am Post subject: |
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| Rev.Vassago; is glad he owns a house. |
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RostyC
Joined: 21 Oct 2005
Posts: 1293
Location: Maryland
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| Posted: Thu Sep 07, 2006 3:42 pm Post subject: |
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| Are you incorperated? That will help with some of the social security tax. It's not expensive to open a S Corp. |
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beachbum2
Joined: 29 Aug 2006
Posts: 69
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| Posted: Thu Sep 07, 2006 4:02 pm Post subject: |
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You need to set up a regular IRA or even a ROTH IRA, This year we put $15,000 in ours. That comes straight off your income BEFORE taxes and you don't pay taxes on it until you withdraw funds. If you wait until you are 72, you do not have to pay ANY taxes on it, and you can even earn interest on it, tax defered.
Don't give it away to Uncle Sam. Talk to a investment banker, or financial advisor. Ask your regular bank, they can point you in the right direction. Most bankers will be thrilled to sit down and explain it to you step by step, and it won't cost you a dime for the info. |
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Cam
Joined: 27 May 2002
Posts: 723
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| Posted: Thu Sep 07, 2006 6:34 pm Post subject: |
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Quote: Beach Bum 2
You need to set up a regular IRA or even a ROTH IRA, This year we put $15,000 in ours....Ask your regular bank, they can point you in the right direction. Most bankers will be thrilled to sit down and explain it to you step by step, and it won't cost you a dime for the info.
Hey, I'm in on this one. I still haven't settled on a tax service/tax advisor and I don't want to miss out.
I know of only about three major personal deductions, an IRA, mortgage interest deductions and charitable contributions. I know there is all kinds of off the wall stuff but are there any other biggies of this kind any of you are taking!?
Beach Bum, you mean my credit union will square me away on the IRA even before I find a tax advisor!? And, $15K!!! I thought they were much lower.
Help me out, here!!! :shock: |
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Rawlco
Joined: 25 Jan 2006
Posts: 1166
Location: Central Maine
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| Posted: Thu Sep 07, 2006 7:19 pm Post subject: |
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RostyC wrote: Are you incorperated? That will help with some of the social security tax. It's not expensive to open a S Corp.
Social security and Medicare get the same amount either way, so it makes no difference.
Quote: Beach Bum, you mean my credit union will square me away on the IRA even before I find a tax advisor!? And, $15K!!! I thought they were much lower
You can contribute any amount that you want, starting with $1.00 if you want. Your bank or credit union is a good place to start. |
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Cam
Joined: 27 May 2002
Posts: 723
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| Posted: Thu Sep 07, 2006 8:36 pm Post subject: |
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Quote: You can contribute any amount that you want, starting with $1.00 if you want. Your bank or credit union is a good place to start
Nah, I mean, what is the upper limit? How much income can you shelter? |
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GMAN
Joined: 13 Feb 2005
Posts: 9878
Location: Tennessee
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| Posted: Thu Sep 07, 2006 10:46 pm Post subject: |
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Rawlco, you can set up a S-corp and avoid the double taxation of a regular C-corp. You only have to pay Social Security Tax on earned income, such as a salary. If you have a corporation, you can pay yourself dividends instead of a salary and avoid the Social Security Tax. I have a friend who has been doing this for years. He owns several businesses and he does that with each business. You can also opt out of Social Security and avoid having to pay it, too. The down side is if you opt out, you can never collect any benefits from it. Of course, you could invest the 15% you would pay into Social Security and have a REAL retirement fund when you get ready to retire. :P
There are some costs involved in setting up and maintaining a corporation. In Tennessee it costs $100 to set up a corporation and a minimum annual tax of about $100, I believe. I am sure it is similar in most other states. You can set your own retirement program up in your corporation and shelter a lot of income. |
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beachbum2
Joined: 29 Aug 2006
Posts: 69
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| Posted: Fri Sep 08, 2006 2:44 pm Post subject: |
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CAM , yes your credit union can open your IRA. You can invest it in stocks and bonds, futures of all kinds or the simpliest and safest is a regular Certificate of deposit. This is insured 100% by the fed and has absolutely no risk. There are several kinds of IRA's and most DO have a limit on what you can contribute per year. Also you can contribute all at once, weekly or whenever you have a little extra money.
I personally prefer a ROTH IRA as the limits are higher and it is geared towards self employed folks like us. Ask one of the investment specalists at the credit union to explain and answer ALL your questions. The financial instutions are competing for our investment money as they can loan it to someone else and make money on it.
GMAN is right, there are zillions of tax shelters, and you don't have to be rich to take advantage of most of them. All it takes is a little research and patience. I earned a double degree in finance and accounting. However the laws change so much each year we always go in once per year for about an hour and talk to our banker. We work too hard for our money to give any more than we must to Uncle Sam.
The interest and taxes on your personal residence is 100% deductable too. If you own a rent house, or trailer ALL expenses are deductable and you can depreciate it out over 30 years too. Don't mean to sound like I know it all because I don't. Just trying to help. |
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Rawlco
Joined: 25 Jan 2006
Posts: 1166
Location: Central Maine
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| Posted: Fri Sep 08, 2006 4:05 pm Post subject: |
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GMAN wrote: Rawlco, you can set up a S-corp and avoid the double taxation of a regular C-corp. You only have to pay Social Security Tax on earned income, such as a salary. If you have a corporation, you can pay yourself dividends instead of a salary and avoid the Social Security Tax. I have a friend who has been doing this for years. He owns several businesses and he does that with each business.
Thank you GMAN. I had a momentary brain cramp when I was posting that before. I have an LLC where all the business income is distributed to the members and is taxed as self employment income, so there is no self employment tax avoidance that way.
Quote: You can also opt out of Social Security and avoid having to pay it, too. The down side is if you opt out, you can never collect any benefits from it. Of course, you could invest the 15% you would pay into Social Security and have a REAL retirement fund when you get ready to retire. :P
I believe that if you invest the same amount wisely you will have a lot more money than social security will ever amount to. For us young people there may not even be any social security in 40 years.
Cam wrote: Nah, I mean, what is the upper limit? How much income can you shelter?
Last year the maximum deductible amount for a traditional IRA was $4000 per person. For this year it may be more. There isn't a limit on how much you can contribute, just a limit on how much is deductible.
Roth IRA is after tax dollars so no contribution is tax deductible. I think there is some way around this for people over a certain age. The nice thing about Roth IRA contributions is that they earn interest TAX FREE. For example. This year you contribute $10,000 to a Roth IRA. In 20 years that $10,000 has earned $20,000 in interest (maybe) and you can take out the entire $30,000 when you are retired with no taxes due on any of it.
With a traditional IRA you contribute $4,000 without paying taxes on it BUT when you take it out in 20 years you owe taxes on that $4,000 AND all of the interest it earns. |
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Cam
Joined: 27 May 2002
Posts: 723
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| Posted: Fri Sep 08, 2006 4:45 pm Post subject: |
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| I really appreciate it Rawlco and Beachbum. Out here I often hear guys bragging about paying no taxes. I have no idea what's going on there, if maybe they are liars or their wives take care of their finances and they are just ignorant. I'm not buying a house just yet but maybe I'll head over to the credit union when I get back in town and lower my taxable income a few thousand dollars. Curious what you guys are doing on this board...involved in trucking in some way? |
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