The reason for lower income taxes is because at lower income, the cost of living takes a higher proportion of income such as food. The basic cost in food necessary to live is higher proportion of income of someone making minimum wage compared to someone making 7 to 10x or more the income of minimum wage.
Think about it. For someone like Donald Trump, basic living is barely a blip of 1/10th of 1% of 1% of his income. Where as, it is significant like close to 20% of the income of someone working minimum wage. As you grow a family, the basic income must grow proportionally.
Keep in mind, OP, that day care is an expense that goes away for each child as they go into public school that is financed by your local taxes. Consider that as well as family size to income basis.
Remember, when you're making $150K a year after business deduction, you alone have enough money to raise a family of 4. People raise a family of 4 for 1/3 of that amount. For 1/3 of your income alone, most households live operate on $50K a year. It means you find a less costly place to live and commute to work if you have to.
$150K - 50% of your income and you have a net of $75K Most would argue you have a net of $80K to $85K. Your wife has a net income of maybe $50K.
Most people manage to live on a household income of $50K but actually have to operate on closer to $35K just for a family of 4. Some might be around $40-45K.
Between you and your wife, your net income after taxes taken out for income and health insurance is still $130K which is 3 times that of what an average income household operates on.
Just your income alone would be nearly twice the average operating budget for a family of 4.
Think about it for a moment.... you are operating on a healthy income so quit whining.... BITCH!
Thanks for chasing that guy off, Richard. He was terrible.
Nov 17, 15 5:53 pm ·
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Anonitect,
I would love to be having $150K to over $200K a year. It would be decent living (of course it should increase with inflation adjustments and other cost of living adjustments.
Why do you expect that just because you have your own business you should have a greatly different lifestyle compared to other people who also work 50 hours a week? I see no reason why business ownership should be incentivized. How does it help society as a whole?
won, i agree a simplification of the tax code would be a good thing. hopefully in an unbiased way, but what we've seen so far is that politicians will only agree to simplifying the tax code if they get to further complicate it with their own special interest bullshit.
my little bit: the fed exists because the government is horrible at breaking monopolies, and that's ok, because certain things just can't happen without scale at the level of controlled monopolies.
Sounds like a convenient narrative. There are some missing details. My wife and I make substantially less than you and your wife and live in one of the most expensive zip codes in the nation. We have significant student loan debt, but still just bought a new car, maintain an office, own a condo, started taking a couple vacations this year, etc...pretty content.
Youre either leaving out details or have unrealistic expectations.
You may not be happy w the current tax code but it's silly not to do legal things that make your life better. It's very unlikely that we will ever see our tax code reduced to a "simple, fair" 3 page plan.
For example, do you really think that it would spur small businesses development if we eliminated deductions for business expenses?
Then there are the non-governmental incentives to not work, like not having to put your children in daycare, lowering your transportation costs, cooking at home instead of eating out to save time...
WDW, how much of the impact you estimate is due to these non-tax factors? Childcare is a huge expense, and is the biggest disincentive to work I see among friends. I suspect the number of parents who quit working to raise children is far greater than the number of high earners who quit because they feel overtaxed.
Most really rich people like what they do, or at least have a fierce competitiveness, so that it isn't primarily a calculus of hours x dollars that motivates them. I suspect the same applies to you.
Anyway, $150k wage income isn't rich - there's hardly anything to donate. You are part of the lumpenproletariat as far as any political organization is concerned.
"Childcare is a huge expense, and is the biggest disincentive to work I see among friends. I suspect the number of parents who quit working to raise children is far greater than the number of high earners who quit because they feel overtaxed."
If your statement above is indeed the case then one possible solution could easily be to have tax-funded childcare for those households without a stay-at-home parent/guardian. That said, I doubt the financial situation is the only deciding factor on that.
"Childcare is too expensive, healthcare is too expensive,student loans are too expensive, taxes are too high."
This all leads me to wonder... if our taxes paid for childcare, healthcare, and education, instead of foreign military campaigns, would Americans be happier about paying them? Would won still have lifestyle complaints?
I think the anti-tax sentiment in the US is fueled almost entirely by the fact that very few Americans see a tangible product of the taxes they pay.
^ A quest for world domination fueled by lies…. “If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”... Joseph Goebbels
For example, do you really think that it would spur small businesses development if we eliminated deductions for business expenses?
No, business expenses should be deductible; all personal income tax deductions and credits should be eliminated. Furthermore all business tax deductions should be simplified; for example, instead of counting miles (what a bureaucratic waste of time that still causes widespread tax abuse) use a flat deduction, say $8,000, for each car legally registered to a business. Completely eliminate the home office tax deduction; how many millions of dollars have been defrauded because of that ridiculous rule? Strip out all the bullshit that takes away from my time trying to run a business.
WDW, how much of the impact you estimate is due to these non-tax factors?
Non-tax factors are big, but taxes are also big. With an AGI of $200k, roughly $60k of that is going to some form of federal, state, or local tax. This is not even including property taxes. If our AGI were roughly $84k, we would be paying about $13k in total federal, state, and local taxes. The delta between the $13k and the $60k is pretty steep.
Youre either leaving out details or have unrealistic expectations.
Because I think this is important for people to understand, I'll be total transparent. Last year, I spent the following:
Childcare: $21K
Housing: $16k
Shopping: $12k
Student loans: $12k
Food and dining: $12k
Charity: $8k (this did go up after earning more money)
Transportation: $8k
Travel: $5k (this covers airfare for four for two family visits per year)
Bills/utilites: $5k
Other including medical: $6k
3-month business operating reserves: $25k (this should not in my opinion be included as taxable income, but is under the current tax code)
Retirement accounts: $25k
Taxes: $60k
This ain't exactly a rich man's lifestyle. And as I started this thread, I could live pretty much the exact same lifestyle on $84k annually as I can $215k. Given that, shouldn't the tax code/policy be adjusted to give a little bit greater incentive to work hard/start a business than what it does now?
I for one would be thrilled to pay half my income or more in taxes if I got health care, retirement, public transit, college attendance, the security that a humanitarian foreign policy and radically reduced military would bring, etc.
All I do now is make donations to corporate welfare, get extorted for various things like shitty insurance and pay taxes for a misused obese and aggressive military, roads that suck, police that don't, schools for morons, lifetime health care and retirement that I'm not eligible for, etc., etc., etc.
Thank you for being so transparent, won. Before everyone nitpicks your budget to pieces, I just want to say it's great that you put it here; I will likely compare it to my own budget carefully because the engineer part of my brain likes to quantify things that way. So thank you for this resource.
(I'll also add, though, that I make less than half what you do, and I still consider myself pretty darn rich; my coworkers who make $28k for 2080 hours of work a year most definitely would call me rich.)
Also, at $84k a year you wouldn't be saving $25k a year towards retirement, and the sense of security that that $25K buys is huge.
Also curious about health insurance costs? Your wife's job must take some portion of her paycheck towards them, yes? Is that included in your $6k medical costs? Or is that your out-of-pocket?
the difference would be $131k per year. if you cut out childcare (21), all of your taxes (which would not go down to 0, but let's be conservative) (60), your business reserve (25), travel (5), and food/dining (12), you'd be at 126k. there's still another 5k you lose for shopping because you work as hard as you do, and i was eliminating your 2 family vacations in that.
taxes might be part of your problem, but they don't seem to be that big of a part.
you have a good job, you have a safety net, you're family is fed and well cared for. you're not the people that need government protection. the people who need help are those who don't have all the nice things and opportunities you have.
OP: I've incorporated. Part of the benefit of this is paying lower taxes on the dividend income. S-corp. Perhaps you should investigate this?
Perhaps your business income can provide tax free, or deferred investments that can benefit your family. Example: investing excess income into real estate, which loses money on paper but provides long term value.
Do your math, perhaps you can adjust your lifestyle and/or business to provide less of the rat race, and maybe less money, but provide a higher quality of life. This isn't a zero sum game. Part of the reason I started a business is in order to do some child care - my child is old enough to be in school, but I spend time after school is done. I work strange hours, but it provides a better family life - this has little to do with money for me.
I purposely do not grow my business because of this. I need flexibility more than I need money. I'm very busy - plenty of work - but do not make the money you do, or what I probably could. But I value a bit of a rounded life.
Child care costs are crazy, especially if you want quality child care and/or live in an expensive city. I don't know how many children you have, but at some point hiring a nanny is cheaper than child care. Perhaps, even a business expense? Ask your accountant.
If you are lucky enough to have quality public education your costs will drop once the children are in school. This is a good time to put this money towards college, in a way that hides from the college finance people - IE: in your name, not the children's.
If you are lucky enough to be making more than you need, but feel the extra is going towards taxes, definitely consider investing the excess money before the tax man gets it. Business investment.
Sounds to me like youve got it pretty good--health care/insurance, family vacations, savings, retirement, etc...
I like Gruens suggestion--re-examining the reasons you are in business and looking for ways to adjust. If you were chasing a higher income figure a few years ago, today it sounds like that number may not matter as much. So ask yourself what does.
Are you deducting for a home office? You can deduct all the direct expenses associated with the office itself (desk, chairs, phones, cabinets, shelves, computer equipment) and proportional expenses for the utilities, house note, taxes, home insurance, ect..
You transportation expenses seem high. I budget $300 a month for gas, insurance, and maintenance and usually come in under that. You need a good amount of liability but not so much collision if you have an older car. You should be getting a discount if you insure with your homeowner insurance company.
Don’t know the OP’s employee count but childcare can be paid by his company, could even provide space in his office for all and offer it to others outside the company to offset the cost and bring the cost to zero. Here is my adjustment to his budget:
Childcare: $21K – Company pays, take a $21k cut in pay, save $5,250 in taxes.
Housing: $16k - Take an $8k cut in pay, set up a real estate company and sign a lease, save $2,000 in taxes. (The other half of your house payment comes from your practice in the form of consulting fees to the real estate company).
Shopping: $12k - Take a $3k cut in pay, save $750 in taxes. (Tough to calculate but anything household fits the bill).
Student loans: $12k (No help here)
Food and dining: $12k - Take a $8k cut in pay, save $2,000 in taxes – Always use a company credit card when eating out, buy grocery’s from Amazon and have delivered to the office, (everybody has party’s).
Charity: $8k (this did go up after earning more money) - Company makes charitable contributions, not you -Take an $8k cut in pay, save $2,000 in taxes.
Transportation: $8k - – Company buys/leases the cars & pays, take an $8k cut in pay, save $2,000 in taxes.
Travel: $5k (this covers airfare for four for two family visits per year) – Company pays; take a $5k cut in pay, save $1,250 in taxes (Who knows your kids went along on a business trip?)
Bills/utilities: $5k – See #2, Real Estate Company pays, take a $5k cut in pay, save $1,250 in taxes.
Other including medical: $6k – Set up a Medical Expense Reimbursement Plan and let the company pay the medical (put your wife on the payroll), take a $6k cut in pay save $1,500 in taxes.
3-month business operating reserves: $25k (this should not in my opinion be included as taxable income, but is under the current tax code)- Move the money to the real estate company that should have enough loss to not have to pay tax, then borrow it back when needed., take a $25k cut in pay save $6,250 in taxes.
Retirement accounts: $25k -– Company pays; take a $25k cut in pay, save $6,250 in taxes. – Never pay into retirement vehicles with taxable money.
Taxes: $60k – Now its $29,500 – you just got a $30,500 raise!
Your salary is now $30k/year (rounding) and it frees up about $30k a year to spend or invest, plus you tax rate will be reduced producing more income.
Carrera, a lot of those don't work. Specifically child care and medical are counted towards compensation if you own more than X% of the shares in the company.
I've been reading the rich dad, poor dad book, one of the main ideas is that the most efficient way to live is as an investor bc investment income is at s far lower tax bracket thsn ordinary income/wages.
Almost every firm I've worked for had owned and leased about a portion of their building.
My sister and brother in law (optometrist and surveyor) are both self employed and have 3 separate businesses
Null, “benefits” & “perks” apply to employees and owning stock has nothing to do with it, you can own all the stock and still be an employee so long as the benefits you receive are offered to all (“all” includes you), perks are different and do not need to apply to all.
My list wasn’t a tax plan, but to make a point…a good tax strategy shouldn’t be thought of as exploiting “loopholes”.…just because you’re making middle class wages doesn’t mean that you need to think like you are “middle class”.
Shu, as you suggest, another strategy is to take no salary at all and just hold the stock as an investment (no employee status), then pay yourself with dividends and only pay capital gains tax which is 15%. Also renting the office to the firm (if you own) and the FF&E is standard operating procedure for small businesses….here too just own stock in an investment company that holds the assets and the “rent” is paid out to you as dividends on the investment you made and taxed as capital gains (15%).
“The upper class keeps all the money and pays none of the taxes, the middleclass pays all the taxes and does all the work, the poor are there just to scare the shit out of the middle class so they keep paying their taxes” – George Carlin
Stop thinking “middle class” and you’ll complain a lot less about taxes.
Carrera, I understand what you are saying, but I would argue that your proposed company set-up is precisely why we need a totally overhauled and simplified tax code. I know what my real business expenses are and what are not. Sure, I could reorganize and bend the tax code to greater advantage, writing off personal expenses as specious business expenses, but I have an ethical issue with that even if there are countless individuals that do not and it is technically "allowed" under the tax code. Why can't the government create a tax code that is simple and fair to avoid this idiocy? I've heard much more from the Republicans on this issue than the Dems. I may not agree with the Republicans proposals, but at least they are addressing it - for me, as a small business owner, this is one of the biggest issues of the upcoming election.
My understanding of life is that we are either the bee or the bear.... Bees do all the work (employees and most business owners)... Bears do very little work, eat all the honey they can handle.
Not a perfect analogy and I have far more to learn from won than the the other way around..... I'm just trying to learn all I can before making the big leap
in theory, if won were to take some time to mentor that employee to be able to take over the work of his clients, he could step aside and spend time with his family. obviously i don't know who won's employee is or much else about the situation, but it seems reasonably possible that won could in fact quit working with the only job being lost as his. since he wouldn't be looking for work, that would effectively reduce unemployment.
won is already in a dual-income family, so if he were to stop working, his family would still have an income. he's even said he doesn't think his quality of life would be reduced much at all. if he were the sole bread winner for his family, that would obviously be different. in fact, many of his expenses are due to the fact he is in a two-income family.
on the contrary it's quite possible that won's employee could be the sole breadwinner for his or her family. if that is the case, then the need to work hard and hold that job would be far greater for the employee (who doesn't have a second income to fall back on) than it would for won (who could stop working with perhaps only a marginal reduction in quality of life). that could incentivize the employee to grow the company and create jobs in a manner that isn't going to be there for won.
won has not stated that his intent was to grow his business in a way that creates more jobs. there are a few threads on here with people saying they prefer to remain small because they would rather spend their time working on architecture related tasks rather than business development and management tasks. it seems to me the point of his post is that he would prefer a more simplified tax code for his own benefit, rather than for the benefit of creating more jobs.
your 'job creator' statement doesn't have any content behind it. it's like you've listened to so many political talking points, that you can't even recognize it as bullshit anymore?
Won, I don’t believe you will see tax reform, regardless of need….our government is expert at nibbling at the edges of problems, and as Miles suggests the rich control Washington and they’re not changing anything.
You never hear the rich speak out about the prospect of raising taxes on the rich, only corporations…. Because they don’t pay personal taxes – Surprise!
Tax reform is a preoccupation of the middle class not the rich, the rich are fine with the system they engineered…. Including brainwashing the middle class into believing that loopholes are unethical so they keep paying their taxes….so they don’t need to.
Learned a long time ago that the best investment anyone can make is minimizing your taxes….30% is a big number….. some just can’t get themselves to do it, that’s why they are middle class…. Not a bad thing, just don’t complain about it.
Curt, I have no idea what your point is. I wasn't commenting directly on Won's situation, or his motivations. I was reacting to another poster who said that he doesn't understand why we would want to incentivize business ownership. He said that he couldn't see how business creation benefits society. I explained that the reason we might want to incentivize the creation of new businesses is because businesses provide jobs for people. Pretty straightforward. Is that what you think is a "political talking point"? Do you disagree with that?
Just here to point out that the government doesn't really want you running your own business even though the politicians may lead you to think they do. They want everyone to be an employee because it is far easier to tax and monitor income of employees. And the reason middle clas business owners (myself included) don't stretch the deductions are because if you get audited and they dont like what you did, find it fraudulent, you can get stuck with a tax bill that would DESTROY you whereas if a rich person got caught owing tens of thousands in back taxes and penalties. they could just sell a home or car and pay the tax bill, or hire a consultant to fight or delay it or otherwise pull strings to get it to dissappear.
tinnt thank you for reminding me......the IRS actually is quite flexible when you have back taxes if you are willing to go on hold for 2hrs when calling. the more you owe the less the percentage of penalties etc...over $50k they start to garnish your wages. they have payment plans. they work on mail time, so you can often delay stuff 60 days by making a few calls........of course if you can't pay anything then yes they will lien any property you may own.
You know, the Republicans are sort of right on taxes...
Trolls gonna troll.
The reason for lower income taxes is because at lower income, the cost of living takes a higher proportion of income such as food. The basic cost in food necessary to live is higher proportion of income of someone making minimum wage compared to someone making 7 to 10x or more the income of minimum wage.
Think about it. For someone like Donald Trump, basic living is barely a blip of 1/10th of 1% of 1% of his income. Where as, it is significant like close to 20% of the income of someone working minimum wage. As you grow a family, the basic income must grow proportionally.
Keep in mind, OP, that day care is an expense that goes away for each child as they go into public school that is financed by your local taxes. Consider that as well as family size to income basis.
Remember, when you're making $150K a year after business deduction, you alone have enough money to raise a family of 4. People raise a family of 4 for 1/3 of that amount. For 1/3 of your income alone, most households live operate on $50K a year. It means you find a less costly place to live and commute to work if you have to.
$150K - 50% of your income and you have a net of $75K Most would argue you have a net of $80K to $85K. Your wife has a net income of maybe $50K.
Most people manage to live on a household income of $50K but actually have to operate on closer to $35K just for a family of 4. Some might be around $40-45K.
Between you and your wife, your net income after taxes taken out for income and health insurance is still $130K which is 3 times that of what an average income household operates on.
Just your income alone would be nearly twice the average operating budget for a family of 4.
Think about it for a moment.... you are operating on a healthy income so quit whining.... BITCH!
Oh here comes Balkins. I'm out never to return.
Thanks for chasing that guy off, Richard. He was terrible.
Anonitect,
I would love to be having $150K to over $200K a year. It would be decent living (of course it should increase with inflation adjustments and other cost of living adjustments.
ALL HAIL BALKINS, SLAYER OF TROLLS!
LOLjustLOL at the idea that the OP is "rich."
gwharton,
I wouldn't say rich so much as well to do.
Making a decent income for a professional that you should expect to see.
Why do you expect that just because you have your own business you should have a greatly different lifestyle compared to other people who also work 50 hours a week? I see no reason why business ownership should be incentivized. How does it help society as a whole?
won, i agree a simplification of the tax code would be a good thing. hopefully in an unbiased way, but what we've seen so far is that politicians will only agree to simplifying the tax code if they get to further complicate it with their own special interest bullshit.
Is this going to turn into a pro flat tax thread?
Not complaining, I think most architects are about as liberal as a group could beno
my little bit: the fed exists because the government is horrible at breaking monopolies, and that's ok, because certain things just can't happen without scale at the level of controlled monopolies.
Sounds like a convenient narrative. There are some missing details. My wife and I make substantially less than you and your wife and live in one of the most expensive zip codes in the nation. We have significant student loan debt, but still just bought a new car, maintain an office, own a condo, started taking a couple vacations this year, etc...pretty content.
Youre either leaving out details or have unrealistic expectations.
Rich, or happy? I'll take happy.
For example, do you really think that it would spur small businesses development if we eliminated deductions for business expenses?
put up a wall and bomb them all.....i am running for president. good morning.
Then there are the non-governmental incentives to not work, like not having to put your children in daycare, lowering your transportation costs, cooking at home instead of eating out to save time...
WDW, how much of the impact you estimate is due to these non-tax factors? Childcare is a huge expense, and is the biggest disincentive to work I see among friends. I suspect the number of parents who quit working to raise children is far greater than the number of high earners who quit because they feel overtaxed.
Most really rich people like what they do, or at least have a fierce competitiveness, so that it isn't primarily a calculus of hours x dollars that motivates them. I suspect the same applies to you.
Anyway, $150k wage income isn't rich - there's hardly anything to donate. You are part of the lumpenproletariat as far as any political organization is concerned.
"Childcare is a huge expense, and is the biggest disincentive to work I see among friends. I suspect the number of parents who quit working to raise children is far greater than the number of high earners who quit because they feel overtaxed."
If your statement above is indeed the case then one possible solution could easily be to have tax-funded childcare for those households without a stay-at-home parent/guardian. That said, I doubt the financial situation is the only deciding factor on that.
"Childcare is too expensive, healthcare is too expensive,student loans are too expensive, taxes are too high."
This all leads me to wonder... if our taxes paid for childcare, healthcare, and education, instead of foreign military campaigns, would Americans be happier about paying them? Would won still have lifestyle complaints?
I think the anti-tax sentiment in the US is fueled almost entirely by the fact that very few Americans see a tangible product of the taxes they pay.
^ A quest for world domination fueled by lies…. “If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”... Joseph Goebbels
For example, do you really think that it would spur small businesses development if we eliminated deductions for business expenses?
No, business expenses should be deductible; all personal income tax deductions and credits should be eliminated. Furthermore all business tax deductions should be simplified; for example, instead of counting miles (what a bureaucratic waste of time that still causes widespread tax abuse) use a flat deduction, say $8,000, for each car legally registered to a business. Completely eliminate the home office tax deduction; how many millions of dollars have been defrauded because of that ridiculous rule? Strip out all the bullshit that takes away from my time trying to run a business.
WDW, how much of the impact you estimate is due to these non-tax factors?
Non-tax factors are big, but taxes are also big. With an AGI of $200k, roughly $60k of that is going to some form of federal, state, or local tax. This is not even including property taxes. If our AGI were roughly $84k, we would be paying about $13k in total federal, state, and local taxes. The delta between the $13k and the $60k is pretty steep.
Youre either leaving out details or have unrealistic expectations.
Because I think this is important for people to understand, I'll be total transparent. Last year, I spent the following:
This ain't exactly a rich man's lifestyle. And as I started this thread, I could live pretty much the exact same lifestyle on $84k annually as I can $215k. Given that, shouldn't the tax code/policy be adjusted to give a little bit greater incentive to work hard/start a business than what it does now?
I for one would be thrilled to pay half my income or more in taxes if I got health care, retirement, public transit, college attendance, the security that a humanitarian foreign policy and radically reduced military would bring, etc.
All I do now is make donations to corporate welfare, get extorted for various things like shitty insurance and pay taxes for a misused obese and aggressive military, roads that suck, police that don't, schools for morons, lifetime health care and retirement that I'm not eligible for, etc., etc., etc.
Thank you for being so transparent, won. Before everyone nitpicks your budget to pieces, I just want to say it's great that you put it here; I will likely compare it to my own budget carefully because the engineer part of my brain likes to quantify things that way. So thank you for this resource.
(I'll also add, though, that I make less than half what you do, and I still consider myself pretty darn rich; my coworkers who make $28k for 2080 hours of work a year most definitely would call me rich.)
Also, at $84k a year you wouldn't be saving $25k a year towards retirement, and the sense of security that that $25K buys is huge.
Also curious about health insurance costs? Your wife's job must take some portion of her paycheck towards them, yes? Is that included in your $6k medical costs? Or is that your out-of-pocket?
the difference would be $131k per year. if you cut out childcare (21), all of your taxes (which would not go down to 0, but let's be conservative) (60), your business reserve (25), travel (5), and food/dining (12), you'd be at 126k. there's still another 5k you lose for shopping because you work as hard as you do, and i was eliminating your 2 family vacations in that.
taxes might be part of your problem, but they don't seem to be that big of a part.
you have a good job, you have a safety net, you're family is fed and well cared for. you're not the people that need government protection. the people who need help are those who don't have all the nice things and opportunities you have.
thanks for sharing, I plan to compare this to my own spending and look forward to the results.
I've been meaning to do this anyway as my family income is up about 20% and I've no idea where it's going
WTF - I had no idea the military budget was so high!
OP: I've incorporated. Part of the benefit of this is paying lower taxes on the dividend income. S-corp. Perhaps you should investigate this?
Perhaps your business income can provide tax free, or deferred investments that can benefit your family. Example: investing excess income into real estate, which loses money on paper but provides long term value.
Do your math, perhaps you can adjust your lifestyle and/or business to provide less of the rat race, and maybe less money, but provide a higher quality of life. This isn't a zero sum game. Part of the reason I started a business is in order to do some child care - my child is old enough to be in school, but I spend time after school is done. I work strange hours, but it provides a better family life - this has little to do with money for me.
I purposely do not grow my business because of this. I need flexibility more than I need money. I'm very busy - plenty of work - but do not make the money you do, or what I probably could. But I value a bit of a rounded life.
Child care costs are crazy, especially if you want quality child care and/or live in an expensive city. I don't know how many children you have, but at some point hiring a nanny is cheaper than child care. Perhaps, even a business expense? Ask your accountant.
If you are lucky enough to have quality public education your costs will drop once the children are in school. This is a good time to put this money towards college, in a way that hides from the college finance people - IE: in your name, not the children's.
If you are lucky enough to be making more than you need, but feel the extra is going towards taxes, definitely consider investing the excess money before the tax man gets it. Business investment.
WDW--
Sounds to me like youve got it pretty good--health care/insurance, family vacations, savings, retirement, etc...
I like Gruens suggestion--re-examining the reasons you are in business and looking for ways to adjust. If you were chasing a higher income figure a few years ago, today it sounds like that number may not matter as much. So ask yourself what does.
Are you deducting for a home office? You can deduct all the direct expenses associated with the office itself (desk, chairs, phones, cabinets, shelves, computer equipment) and proportional expenses for the utilities, house note, taxes, home insurance, ect..
You transportation expenses seem high. I budget $300 a month for gas, insurance, and maintenance and usually come in under that. You need a good amount of liability but not so much collision if you have an older car. You should be getting a discount if you insure with your homeowner insurance company.
Don’t know the OP’s employee count but childcare can be paid by his company, could even provide space in his office for all and offer it to others outside the company to offset the cost and bring the cost to zero. Here is my adjustment to his budget:
Your salary is now $30k/year (rounding) and it frees up about $30k a year to spend or invest, plus you tax rate will be reduced producing more income.
^go to prison for following Carrera's advice, housing and food costs covered for you.
Loopholes aren't against the law, that's why they're called loopholes and not fraud.
Carrera, a lot of those don't work. Specifically child care and medical are counted towards compensation if you own more than X% of the shares in the company.
pretty sure that rule only counts if you're audited, right null?
Crap, your in the highest tax bracket, pay retitement accounts BE FORE taxes I don't know much about this stuff, good reading....
I've been reading the rich dad, poor dad book, one of the main ideas is that the most efficient way to live is as an investor bc investment income is at s far lower tax bracket thsn ordinary income/wages. Almost every firm I've worked for had owned and leased about a portion of their building. My sister and brother in law (optometrist and surveyor) are both self employed and have 3 separate businesses
Sorry, phone typing....
"I see no reason why business ownership should be incentivized. How does it help society as a whole?"
Uh....I don't know, just spitballing here...maybe because it creates jobs?
Null, “benefits” & “perks” apply to employees and owning stock has nothing to do with it, you can own all the stock and still be an employee so long as the benefits you receive are offered to all (“all” includes you), perks are different and do not need to apply to all.
My list wasn’t a tax plan, but to make a point…a good tax strategy shouldn’t be thought of as exploiting “loopholes”.…just because you’re making middle class wages doesn’t mean that you need to think like you are “middle class”.
Shu, as you suggest, another strategy is to take no salary at all and just hold the stock as an investment (no employee status), then pay yourself with dividends and only pay capital gains tax which is 15%. Also renting the office to the firm (if you own) and the FF&E is standard operating procedure for small businesses….here too just own stock in an investment company that holds the assets and the “rent” is paid out to you as dividends on the investment you made and taxed as capital gains (15%).
“The upper class keeps all the money and pays none of the taxes, the middleclass pays all the taxes and does all the work, the poor are there just to scare the shit out of the middle class so they keep paying their taxes” – George Carlin
Stop thinking “middle class” and you’ll complain a lot less about taxes.
Whoa, now, EKE... that's just crazy talk.
Carrera, I understand what you are saying, but I would argue that your proposed company set-up is precisely why we need a totally overhauled and simplified tax code. I know what my real business expenses are and what are not. Sure, I could reorganize and bend the tax code to greater advantage, writing off personal expenses as specious business expenses, but I have an ethical issue with that even if there are countless individuals that do not and it is technically "allowed" under the tax code. Why can't the government create a tax code that is simple and fair to avoid this idiocy? I've heard much more from the Republicans on this issue than the Dems. I may not agree with the Republicans proposals, but at least they are addressing it - for me, as a small business owner, this is one of the biggest issues of the upcoming election.
Fair? LOL Money is speech. The more you have the louder your voice.
U$A! U$A!
My understanding of life is that we are either the bee or the bear.... Bees do all the work (employees and most business owners)... Bears do very little work, eat all the honey they can handle. Not a perfect analogy and I have far more to learn from won than the the other way around..... I'm just trying to learn all I can before making the big leap
eke, i believe won said he had one employee?
in theory, if won were to take some time to mentor that employee to be able to take over the work of his clients, he could step aside and spend time with his family. obviously i don't know who won's employee is or much else about the situation, but it seems reasonably possible that won could in fact quit working with the only job being lost as his. since he wouldn't be looking for work, that would effectively reduce unemployment.
won is already in a dual-income family, so if he were to stop working, his family would still have an income. he's even said he doesn't think his quality of life would be reduced much at all. if he were the sole bread winner for his family, that would obviously be different. in fact, many of his expenses are due to the fact he is in a two-income family.
on the contrary it's quite possible that won's employee could be the sole breadwinner for his or her family. if that is the case, then the need to work hard and hold that job would be far greater for the employee (who doesn't have a second income to fall back on) than it would for won (who could stop working with perhaps only a marginal reduction in quality of life). that could incentivize the employee to grow the company and create jobs in a manner that isn't going to be there for won.
won has not stated that his intent was to grow his business in a way that creates more jobs. there are a few threads on here with people saying they prefer to remain small because they would rather spend their time working on architecture related tasks rather than business development and management tasks. it seems to me the point of his post is that he would prefer a more simplified tax code for his own benefit, rather than for the benefit of creating more jobs.
your 'job creator' statement doesn't have any content behind it. it's like you've listened to so many political talking points, that you can't even recognize it as bullshit anymore?
Won, I don’t believe you will see tax reform, regardless of need….our government is expert at nibbling at the edges of problems, and as Miles suggests the rich control Washington and they’re not changing anything.
You never hear the rich speak out about the prospect of raising taxes on the rich, only corporations…. Because they don’t pay personal taxes – Surprise!
Tax reform is a preoccupation of the middle class not the rich, the rich are fine with the system they engineered…. Including brainwashing the middle class into believing that loopholes are unethical so they keep paying their taxes….so they don’t need to.
Learned a long time ago that the best investment anyone can make is minimizing your taxes….30% is a big number….. some just can’t get themselves to do it, that’s why they are middle class…. Not a bad thing, just don’t complain about it.
Curt, I have no idea what your point is. I wasn't commenting directly on Won's situation, or his motivations. I was reacting to another poster who said that he doesn't understand why we would want to incentivize business ownership. He said that he couldn't see how business creation benefits society. I explained that the reason we might want to incentivize the creation of new businesses is because businesses provide jobs for people. Pretty straightforward. Is that what you think is a "political talking point"? Do you disagree with that?
Just here to point out that the government doesn't really want you running your own business even though the politicians may lead you to think they do. They want everyone to be an employee because it is far easier to tax and monitor income of employees. And the reason middle clas business owners (myself included) don't stretch the deductions are because if you get audited and they dont like what you did, find it fraudulent, you can get stuck with a tax bill that would DESTROY you whereas if a rich person got caught owing tens of thousands in back taxes and penalties. they could just sell a home or car and pay the tax bill, or hire a consultant to fight or delay it or otherwise pull strings to get it to dissappear.
tinnt thank you for reminding me......the IRS actually is quite flexible when you have back taxes if you are willing to go on hold for 2hrs when calling. the more you owe the less the percentage of penalties etc...over $50k they start to garnish your wages. they have payment plans. they work on mail time, so you can often delay stuff 60 days by making a few calls........of course if you can't pay anything then yes they will lien any property you may own.
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