Want to learn how to pay no taxes? Or how about how to pay less taxes for the rest of your life? Read on.
I've been studying up on tax laws since 1999. You might not be able to pay no taxes. However, this post should help you pay less taxes. For most of us, taxes are our largest ongoing liability. Therefore, it behooves us to get as smart as possible about taxes.
Ever since I was 25, I paid more than $100,000 a year in taxes. You don't get a thank you card if you pay over $1 million dollars in taxes in case you're wondering. Instead, you get the government hooked on your juice with fishing letters from the IRS asking for more!
I didn't mind paying my fair share of taxes when I was in my 20s because I was excited to progress in my career. I felt lucky to just have a job that allowed me to save like crazy and help others financially through charitable donations. As I grew older, my views on income taxes changed.
It's Time To Pay Less Taxes And Save More Money
Since the turn of the century, we've witnessed a devastating war in Iraqistan that by some estimates has taken over 1 million lives. We've observed Congress do nothing to pass a balanced budget since 2008 while giving themselves pay raises every single year.
During the 2009-2010 financial crisis, the government doled out massive bailouts to institutions such as AIG while allowing executives to pay themselves millions of dollars. AIG even had the audacity to contemplate suing the federal government this year for wrongful terms! What the hell.
I felt sick to my stomach supporting such atrocities by a government who also discriminates against certain citizens while displaying no fiscal discipline. Now higher credit score borrowers must pay higher mortgage fees, while riskier borrowers get to pay less.
Why can't we all be treated equally? Why is there a marriage penalty tax? How come your Social Security benefits go back to the government if you die without a surviving spouse? I don't know.
Pay Less Taxes Because The Government Is Inefficient
When it takes 18 months for the city to fix a noisy and dangerous manhole cover, perhaps paying tens of thousands of dollars in state taxes is not worth it anymore. How about $5 bucks instead?
John F. Kennedy once said, “Ask not what your country can do for you, ask what you can do for your country.” Unfortunately, those words were spoken on January 20, 1961. Most of us weren't alive then since the median age in America is only 35. I'm afraid our society has permanently adopted a one-way take, take, take mentality.
I think I've paid my dues. Unless you've paid as much in taxes, please don't criticize me for writing an article on how to help you legally pay less taxes. To build wealth, we must minimize our expenses. Taxes are one of the largest expenses we'll ever incur.
In fact, most Americans paid no federal income taxes in 2020. The Tax Policy Center also forecasts that 57% of working Americans won't pay federal income taxes in 2021 either! Perhaps we should join the majority!
The Best Way To Pay Little-To-No-Taxes
Besides earning less money, the best way to pay little to no taxes is to make your income equal your standard deductions or itemized deductions.
For 2023, single filers get a standard deduction of $13,850 while married couples get $27,700. This is up from $12,950 and $25,900, respectively. Therefore, if you want to pay no taxes, then make up to $13,850 a year as an individual or up to $27,700 a year as a couple and voila! You won't pay any taxes.
The problem is it's hard for a single person or married couple can live off only $13,850 and $27,700 in income, respectively. Hence, forget about the pitiful standard deduction. Go for the itemized deduction which includes home mortgage interest, property taxes, and charitable givings.
Obviously you need a mortgage to be able to pay mortgage interest and property taxes, so consider owning a primary residence already. The government subsidizes your ownership by allowing you to write of your mortgage interest and property taxes.
If you want to truly make money in real estate, then you've got to own more than your primary. One way is by buying a rental property. With a rental property, you also get to take advantage of depreciation and other expenses associated with operating the property. Therefore, you earn income more tax efficiently.
As for charity, give as much as you can. It is better to give to causes you are passionate about rather than pay more taxes to the government who ends up wasting your money.
The below are three examples with some notes on how to minimize your tax bill.
How To May No Taxes On Job Income Or Passive Income
How To Pay No Taxes Notes
* To generate passive income, you've first got to save a lot. You can replace my passive income examples with normal wage income if you like. The effect is the same.
* What is peculiar is that one still has to pay property taxes to the state. At least property and state income taxes are deductible and the money is not going to the federal government. You can choose to move to a different state to lower your tax liability. Changing citizenship on the other hand is much more difficult.
* Starting in 2018, there is a SALT cap limit of $10,000 per person. If you get married, you actually don't get $20,000 but still only get a $10,000 limit. This is going to be a net negative for many higher income earners who own property in expensive coastal cities.
* A $30,000 mortgage interest deduction can be calculated as a 3% mortgage interest rate off of a $1 million dollar loan. Too bad the mortgage limit is now $750,000 for 2020+. Some may poo poo paying interest. But I say paying interest with other people's money to build wealth is much better than paying taxes to the government.
* If you have a modified adjusted gross income (MAGI) of $200,000 as an individual, or $250,000 as a married couple, you'll also have to pay a 3.8% surcharge tax on all capital gains and dividend income. This is called the Net Interest Income Tax. The government does not have the guts to cut spending, hence more taxes are inevitable.
* You might be wondering how does someone survive if their entire $60,000 in income goes to charity, mortgage interest, and property taxes? The answer lies in living off your savings.
The Standard Deduction
The standard deduction was increased to $13,850 per individual and $27,700 per couple in 2023. In other words, any income you make up to these levels is tax free. If you are in the 10-12% TAX BRACKET you pay zero percent tax on long term capital gains and qualified dividends up to $44,625.
How To Pay Zero Taxes on Rental Property Income
How To Pay No Taxes Notes
* Owning a rental property is like owning a business. All expenses related to running your rental property are deductible from the rental income. Just be careful that deductions start phasing out after you make more than around $166,000 a year.
* A key part of the expense is depreciation. Depreciation is a non-cash expense to provide a fair way for the normal depreciation of your property.
* There's no escaping property taxes again, but at least it is deductible. It's important to convince the city your property is worth the least amount possible. If you do, you can pay the least amount of property taxes.
* It's best to receive no rental income while you are in a higher tax bracket. Once you've retired, you'll probably be in a lower tax bracket. You should receive more rental income given your rent will be higher and mortgage interest and amortization will be lower.
Rental Property Is Less Passive
The only thing about owning rental property is that it scores low on the passive investing scale. The older and richer you get, the less you want to deal with maintenance and tenants.
This is where investing in real estate crowdfunding platforms like Fundrise and CrowdStreet, my two favorites, come in. Real estate crowdfunding allows you to invest in commercial real estate around the country with potentially higher returns without any grunt work.
For example, there is huge valuation and cap rate differences today between expensive coastal city real estate and heartland real estate. With real estate crowdfunding, an investor can arbitrage the valuation and cap rate differential for potential profits.
There’s no reason employees need to be stuck paying $4,500 a month for a crappy two-bedroom apartment in San Francisco or Manhattan when they can rent a massive house for half the price in Austin, Texas.
How To Pay No Taxes On Business Income
Notes On How To Pay No Taxes On Business Income
* Starting your own successful business is harder than just working a day job, but it's one of the most gratifying things you can do. A lot of your normal living expenses can be considered business expenses. For example, you can have annual board meetings in Rio de Janeiro if you want. The flights, meals, and accommodations are all expensable. Nobody says your annual board meeting has to be in a place of suffering. Everybody should at least start their own website today to take advantage of the internet and the 3 billion people online.
* As an employer and employee, you get to contribute up to $19,500 to your Solo 401K + 20% of operating profits. In this case, the person contributes $18,000 + $13,000 = $31,000 that doesn't get taxed. You can also contribute $5,000 for yourself and for your spouse in a traditional IRA. Eventually you will have to pay taxes on these pre-tax retirement accounts, but not now.
See: How To Save Over $100,000 Pre-Tax In A SEP-IRA And Solo 401k
* The business has a net profit after tax of $16,800, however you've got so many more tax shields at your disposable which can easily wipe out the tax liability.
* Business taxes are one of the most complex taxes to calculate. The above is just a simple example of how a cupcake owner with $100,000 in revenue might not have to pay any taxes at all.
How To Pay Less Taxes On Business Income Part II
Notes On How To Pay Less Taxes
After Gawker Global filed for bankruptcy, Fortune Magazine wrote an amazing expose regarding how Gawker Global created a Hungarian subsidiary to transfer revenue to in order to pay only a 5% effective tax rate instead of a 34% effective US tax rate.
If you are feeling guilty about paying no federal income taxes, maybe you no longer should!
How Your Kids Can Pay No Taxes
One of the best ways for you to reduce your taxable income and also enable your kids to pay no taxes is to pay them from your business. Let's say you are in the 35% tax bracket. You can pay your kids to work on your business, essentially transferring your 35% tax liability to them.
If your kids earn up to the standard deduction maximum, they won't have to pay taxes. I would also encourage you to open up a Roth IRA for your kids and contribute the maximum each year ($6,000 for 2022). The contribution is tax-free, compounds tax free, and can be withdrawn tax fee after 5 years.
Recommendations On Paying Less Taxes
1) Start Your Own Small Business
I encourage everyone to start their own small business. You get a lot more flexibility with deductions as you can see in the example above. The best way to start a business is create a website like mine by signing up for a hosting company like Bluehost, which costs less than $4/month. You get a free domain name for one year too.
Once you've got your simple website up and running, you help legitimize your business. There's no need to incorporate as an LLC. Just be a sole proprietor, report your income on your schedule C, deduct all your expenses, and pay taxes on your operating profit.
Whenever I spend money on travel, it is largely a business expense because I'm always prospecting for potential clients. I expense a portion of my car lease payment given I drive down to the Peninsula to work at my consulting clients. Many of my meals are also expensed due to client luncheons and dinners.
Finally, I contribute over $50,000 a year pre-tax to a Solo 401k because I run my own business. You can check out my step-by-step guide on how to start your own website today. Once you've got your own website, you've helped legitimized your business.
2) Invest In Real Estate
If you want to pay less taxes, you need to change the composition of your income more towards investment income. Earning stock dividend income and bond income are great because they face lower marginal income tax rates.
However, my favorite tax-efficient investment income is rental property income. Because you can deduct all rental property expenses, you can lower your taxable rental income. Further, amortization is a non-cash expense which also significantly reduces your tax liability.
After you have purchased enough rental properties that you can handle (four for me), invest in 100% passive private real estate funds like the ones offered from Fundrise. Fundrise manages over $3.5 billion and invests primarily in single-family and multi-family properties in the Sunbelt.
After I had my son in 2017, I sold my hard-to-manage rental property and reinvested $550,000 in private real estate. It's been great to earn more passive income in order to spend more quality time with family.
3) Manage Your Finances In One Place
I recommend signing up for Empower, a free financial management tool online that helps you track your net worth. It also helps you analyze your investments for excessive fees. I ran my 401k through their 401k Fee Analyzer and found out I was paying $1,700 a year in fees I had no idea I was paying!
They’ve also come out with their incredible Retirement Planning Calculator. It uses your linked accounts to run a Monte Carlo simulation to figure out your financial future. You can input various income and expense variables to see the outcomes.
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How To Pay Little to No Taxes is a Financial Samurai original post. I've been writing personal finance articles online since 2009. FS is one of the largest independently-owned personal finance sites online with over 1 million visitors a month. You can sign up for my free weekly newsletter here.
Hi,
This article doesn’t make sense. My gross income is around 150k-160k filing jointly. There is no way I can pay no taxes. Do you have any suggestion in my case. Also buying mortgage worth 1million you atleast need 200k as down payment and if you do not take home any money. You will never be able to buy any mortgage.
I can guarantee this genius and ethical hacker…i didn’t know how he did but all i know is that i contacted him after a friend referred me and he helped me with his hacking skills and since then i have been paying lesser tax
So in the first scenario you are taxed 15% on $20k ($3k). So you should subtract the difference from your 28% on $100k ($28k), meaning you get a tax refund of $25k each year?
I am confused. If I make only 23k a year now and want to stay in this tax bracket, what is my best way to lower my taxed income? Ira or 401k? also this is a little different but in my state I we get greatly subsidized health care is you make under 23k, if my income rises about to lets say 25k, is there a way I can put money away in such a way that my over all income stays below 23? Thanks!
if most of your income is from w2, having your own side business no matter how big or small and claiming a net loss is the way to reduce your taxes.
I have a friend that has a wine blog where he makes about 10k a year off ads and consulting. He deducts almost 100k in actual wine as business expenses (he needs to drink wine in order to blog about it no?) and claims a 90k loss that he writes against his w2 income. Party will probably end for him soon but so far it’s been good (he has claimed net profit some years).
WHY WORK??
ugh.. it’s tax season again and I’ve been dreading it..
I just got my taxes back and I have to write a check to Feds for an additional $19k for a total 2016 tax bill of $88k AND to the great state of CA, I have to write a check for an additional $8k for a total CA tax of $28069.. Thanks to $6k on AMT and another $3k for O’bamacare tax.
I’m 58 and have been asking myself, why should I bother to keep working when i’m paying 37% for taxes (37% when you add Fed, State, SS, Medicare tax. Thankfully I have enough to retire on, so I think this may be the year!!
It makes me sick paying this to the gov for worthless wars and welfare for those that choose not to work or take advantage of the system.. Yes, I’ve become very cynical in my old age…
I can stop working.. pull out $72k annually from my investments, and save $20k per year by getting subsidized health care from O’bummer.. and sit on the beach drinking mai-tai’s!
Exactly. I stopped in 2012 to make much less money and I am SO MUCH HAPPIER! The best thing I’ve done is start a business with this website and be more free.
You can always go John Galt too :)
I guess I’m WAY out of your league for this to help me. I raised 3 kids who are all out on their own now. I work as a school nurse and another part-time job on the weekends for a total of $35K. Because my kids are grown and because I am within 10 months of paying off my home, I am paying Federal AND State taxes this year. They want another $1,000 of my money so that what I tried to save for an emergency will now be depleted. How can these principals work in my situation??
Just so you know, I file single and I have an excellent credit score of 825. I have credit card debt of about $2500. I’m afraid allowing more to be taken out of my paycheck will result in my not being able to pay household expenses. Any thoughts???
if you are not already, you could reduce your taxable income by putting into a 401k if your company offered it, or an IRA if your company did not offer it..
But taking more money out she my not be able to make monthly expenses?
I filled for bankruptcy chapter 7, 6 months ago, and got a letter 2 moths ago that i was granted and my case was closed. Couple days ago i received a letter from Arizona Department of Revenue saying i owe taxes from period ending in 12/31/2004., 12 years ago, and that i have 15 days to pay. According to them i owed 240.07 but they are now charging me 466.64 Is this right. I feel like this is buishit. They are calling it Bankruptcy Discharge. Should fight against this. Can they charge me for tax that i never knew, and never received anything from them in 12 years. Can someone help me on how to deal with this. I don’t hear pay for it. I think is an absurd. thank you.
Send them a copy of your bankruptcy discharge. It is also helpful if you can get in touch with an individual revenue agent and get them to look at your case. Do not pay anything no matter what they tell you, a single payment could be construed as affirmation of your debt and will only spur them on to collect the rest of it and possibly other taxes you might not know about either.
I cannot agree with you more on multiple points, great article, great way of thinking, thank you for sharing.
You will see my email ID with this comment, you mention that for the past several years you have been doing your own taxes so that you can understand the nuances and create pro forma scenarios such as AMT etc, do you have those in Excel that I can see? I have been trying hard to create an Excel that replicates the 1040 but it’s proving to be next to impossible.
Please help! I just turned 33. Have been working as a business owner in a hectic, high risk, exhausting industry for 13 years hoping for the right opportunity to come along and just as I was about to throw in the towel and take a new direction in life…. BAM! $800k in profit over the past year. Most of my business expenses related to this profit were incurred before the end of 2014 and I collected most of the receivables this year without many expenses to offset the income. I file cash basis as an S-Corp. This is pretty much a one shot business lick. I haven’t made any decent new money in 2015 and I may never make decent money again in this industry. I’ve maxed out retirement accounts (SEP IRA) and spent money on everything that I can justify for the business that has some amount of benefit to me professionally. After all this my CPA is telling me that I’m in the highest tax bracket and where I sit currently for 2015 I’ll owe approximately $185k in taxes!!! I just can’t stomach that amount. I feel like there has to be ways to not give the government that kind of money to squander. I risked every dime I had to invest into this high risk endeavor, slept on a blowup mattress for 10 months 1500 miles away from home and worked 12-14 hrs a day 7 days a week to make it happen. I stuck it out in a crazy business that has robbed me of any normal social life (constantly moving around the country), worked my tail off and risked it all and was fortunate enough to be in a good place at the right time and take advantage of an opportunity with every bit of energy I could muster. Bottom line is I don’t have faith in the wasteful, runaway train monster governments and don’t want to give them my hard earned money that I want to use to stabilize my family, finally. I know there’s lots of details someone that might be interested in helping me or providing insight would need to know to do so that I’d be happy to provide. I don’t have any mentors with the right experience to turn to so I’m looking for input out here on the web. Any guidance would be much appreciated. Thanks! Randall
Randall,
I agree with your CPA, maybe because I am a CPA, but mostly because I know there is no legal way out of it. I’ve seen many people in similar situations, they make a bunch of money one year and come in thinking there is some kind of magic dust that takes away tax obligations. That’s what good CPA’s do right? Unfortunately you have to get creative and do things like not receive the money in a certain year and even that strategy is dangerous because the wording of the law say’s something like “receive or could have received” payment for goods/services rendered.
I will caution you to not go in for scams that promise to eliminate your tax bill because chances are if you fall for one of these, you will wish to God you had just paid your taxes when faced with actual jail time, penalties and attorney fees.
Increasing business expenses has got to be the easiest most joyful way to enjoy life. Buy more assets which create more income. ;)
I like your examples Sam, but why not just live very low key? That 61,000 in passive income won’t have you paying more than $10000 in taxes (even living in California). I believe that we all should try to live by the old Spartan adage of never showing wealth. That Lamborgini over there? That’s for suckers… only making the Italians richer. So an extra $40000 a year is way better in my book–something a good investor could turn into over a billion dollars. And that’s power, and freedom to start great businesses for the sake of humanity.
I believe almost everyone is capable of the following:
Step one: get rid of all debt. Any debt over 4% get rid of it. Let’s face it, if you are not a spectacular investor, it is most likely not worth the risk. Without it, you’ll probably have a much clearer head anyway.
Step two: Decide why and where you want to live.
Step three: Locate suitable piece of land, water etc… Decide on a travel trailer, fifth wheel, boat, tiny house, stone house… As a slightly worse alternative, consider owner financing that land, renting it, or buying a fixer upper. But remember a house is not an investment! Thousands of dollars (I mean millions) in property taxes and maintenance are being discarded which could otherwise be put to use in the market or a hedge against inflation (Private gold/metals).
All for quality of life or take a gamble on the corporate ladder? No thanks. I’d rather keep all my money than give 85% of it back to interest, taxes, healthcare, and living expenses. A personal business is a much safer bet, or an educated gamble with infinity times the reward. You must know that since you started this blog, right?
Sure, sounds good. What’s your current situation now e.g. age, net worth, passive income, occupation etc?
I’ve got a new passive income post update for 2016 you can check out here. Progress!
Just wondering if anyone could answer this. If I earned $40,000 at my job, would the federal income tax be roughly the same as if I retired and earned the same amount in only dividends? Thx
Probably yes since the dividend tax rate is 15% and $40,000 income is also around 15%. You’re golden if you can get $40,000 in dividends. That’s a $1,000,000 portfolio at 4%. Not bad.
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This is easy.
1) Move to Alaska or Florida
2) Be or get married
3) Earn up to $94,100 in Qualified Dividend Income
Federal Income Tax = 0
State income Tax = 0
So easy, I wonder why more people don’t do it?
I understand bringing income to zero. But if you do that and you need a loan or a credit card with a greater credit line for your business–how do you do that? They ask for tax returns…tax returns that show zero income don’t float well with banks, credit card companies or mortgage companies. No financial institution seems to care about the amount of money flowing through your accounts. Just curious.
Thanks
You’re right. The answer is that you probably can’t get a loan. Get the loan first while you’re paying taxes, and then get that income down to a level where you don’t pay taxes.
“I don’t mind paying my fair share of taxes”. This is a mindset we need to change. Just what our “fair share” is have we become, like cattle, so used to?
The 1776 American Revolution was started over a ONE PERCENT tea tax. There was NO personal income tax until 1913. When the Income Tax was first enacted, it was done so to pay for the costs of World War I. It was promised that once that war was over, the Income Tax would be repealed. It was not. Liars. When the Income Tax was first enforced, one had to make at least $40,000 to be taxed AT ALL…and was only taxed at ONE PERCENT. If you made $40,000 in 1913, you could live like a king! Yet today, the sheeple who struggle to make ends meet are content to be robbed, at what amounts to gunpoint, of a THIRD of their income by the government. Add state and local taxes and “fees” (disguised taxes) and we are raped and robbed of HALF our annual income.
Abolish the current Income Tax system, which is now more oppressive than RUSSIA’s, and replace it with a low, flat income tax, with no loopholes.
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I have a few questions on paying little taxes.
Let’s assume you have a well paying job and are able to put away 20k per year in a 401k (pre-tax). You also end up buying two rental properties.
The rental properties produce about 30k but you have 15k in operating expenses as well as mortgage interest etc. You can then also deduct about 12k for property depreciation. So you would only have to pay taxes on about 3k (30k-15k-12k=3k).
So now you decide to quit your job and roll over your 401k into a pre-tax IRA.
You are able to frugally live from rental income and do not get a job again.
In this situation:
1) Is it possible to roll over a few thousand dollars from the IRA to the Roth IRA every year, just enough to stay in the 10% federal tax bracket? (e.g. 10k minus rental income)
2) Would you be able to get free Obamacare Health insurance because your AGI is under 12k per year? (full subsidy amount for single filers making under 12k) Despite the fact that your income is obviously higher but your deducting most of it with operating expenses etc?
3) To top it off, could you get a very low paying job for about 2k per year (think working for a few weeks in a summer camp or something like that) and contribute those 2k to a ROTH IRA, therefore qualifying for a $1,000 tax credit? (50% tax credit on up to $2k for single filers making under $18k) –> still insuring that the overall tax AGI stays around $10k/year to stay in the 10% tax bracket.
Are there any flaws with my line of thinking?
Makes sense. And if you need money, just take from savings.
The government doesn’t tax wealth over $5.4 million (death tax). Focus on growing net worth over growing income!
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Interesting article. If there was a way to have a decent income and not pay taxes, the government would shut that down in a hurry.
I used to prepare taxes for individuals and businesses, and I have yet to see anything that really eliminates taxes beyond the obvious stuff like 401K contributions and charitable deductions. There was one return that I worked on where someone purchased some hideous looking yard sculptures, let them sit around for several years, had them appraised at pretty high values and then donated them to some organization. The taxpayer got the benefit of the appreciated value of 25K for each piece of “art”, which was probably BS and paid a lot less in taxes. I think the key to making this whole thing work is buying something from a semi-legitimate artist and then finding an appraiser who knows how to justify the high value of your unique art. Plus you really have to let the things sit around for a while to justify the appreciation in value.
Other than that, the best way to avoid taxes is to have a small business and cheat. Buy a new car and say it is 100% business while keeping a junker that you claim is a daily driver. Cheating on your taxes is like speeding on the interstate, a little over the limit isn’t going to get you into much trouble, but too much will land you in jail.
By the way, I will never admit to writing this article.
Mike – I think you’re pretty spot on. The only way to really not pay taxes is to cheat. Gotta love cash only businesses and huge deductibles that are obviously not real.
But here’s a good post I wrote on “Tax Rules for using your SUV as a tax deduction“.
Well one option that’s rarely mentioned is to simply make less money. We made the decision to go part time last year, couldn’t be happier. We did the math and between federal, state, local, medicare, and SS taxes 40% of our income came off the top. Add transportation costs, over half our income is gone. Going part time put us in lower federal and state brackets, now we’re taxed about 25% of our incom3. Time is money, I’m not interested in being taxed out of 50% of my life.
Sad but true Nick, high tax rates take away the incentive to work. Take a manager job that pays 25% more than a worker job for example, the manager pays more taxes, has more responsibility, probably has to work more hours and probably has to pick up the phone during off hours. Is it worth it? For many the answer is no. Thank you progressive tax system.
Hi Sam, thanks for the piece. I just wanted to add that a Solo 401k, while great, may not be applicable as most small-business owners who employ full-time employees will have to make equal contributions to all employee accounts. Of course, there are certain ways to circumvent this by hiring only employees who are non-resident alien, or union, or under 21, etc. but attempting to do so often ends up being more hassle than its worth. However, I would definitely recommend a solo 401k for anyone who’s an independent real estate agent, accountant, lawyer, tax professional or in any business only with their spouse and/or children as employees. As a retailer, I just don’t think the cupcake shop is the most fitting example here as its difficult to adhere to all the eligibility rules of a solo 401k in a restaurant business.
i am an 80 year old retired businessman. I am selling my business to my son under a formula that is good for both of us. this morning I received information on the business from my cpa and i am, paying on 250k. I was astounded at the amount. I do not want to go to work again on a startup company. I am an S corp.
I just stumbled upon this forum. If I am planning to make dividends & capital gains my sole income (disabled, very low expenses, house paid off, not near retirement age), should I do it through a corporation (& which type, S-corp, LLC., etc?) or just as an individual? Which way would be most beneficial tax-wise? Any thoughts? Confused.
I know this is an older fourm but how much would I have to donate in order to pay no income taxes. I make less than 25k a year and have no assets. I just feel the feds are misusing my funds. This year (2014) will be the 1st year I will not get anything back due to being self employed.
Without knowing all your details, I don’t know. How much in taxes are you paying now? If you make less than $10,000, you shouldn’t have to pay any federal income taxes at least.
Interesting post Sam. I’m just not sure how capital efficient it would be to save up $100-$200k to sit around in a saving account earning no interest which you draw down to live on. I assume you aren’t suggesting selling capital assets like your shares that are producing dividend income, which you’d incur capital gains on, nor other capital assets that you would incur tax on from a sale. The potential “lost income” from that $100k sitting there possibly something like $5-10k /yr? But perhaps, based on the example illustrated, you have $60k passive income coming in anyway that this isn’t such an issue :)
What percentage of the 1 percent own businesses? I feel that many of the one percenters make way more than 380,000, but use tax shields as the ones you described to show less income.
Well, I will soon be paying taxes on 6.4% less of my paycheck, since I’ve bumped my 401k up another 1% ).
Many thanks for the thoughts you post here and on Yakezie, trying to push everyone to put away as much as they can every year!
Congrats! Careful. Saving massive money will become addicting!
It has become a very fun indeed!
Great post, I’ve been thinking along the exact same lines recently.
After the standard deductions I have been thinking to donate increasingly large amounts to charities that fit my purpose, rather than allow the Govt to waste more of my tax dollars. I believe that you can donate up to 50% of your AGI which will wipe out taxes from all but the highest income earners.
Better to donate to someone in need rather than donate to the Goverment of greed.
BTW what about the minimum alternative tax?
Secondly depending what province you live in you can earn up to 75,000 dollars almost tax free in Canada.
The AMT is a tough one, but doesn’t really start hitting until after making $150,000 or thereabouts. With $150k you can bring your AGI down to around $100k or less and AMT will be minimal if nothing. It’s case by case.
$200k is my ideal income for Max happiness. Much more and the government starts getting you and deductions start getting phased out.
A quick note on German taxes, it’s based generally on family income, so my wife earning 6 figures takes home approx 64%, of I worked I would lose over half of it. A single person usually loses around 50% to tax.
Secondly while Germany is hurting due to an ageing population (mostly on healthcare), overall it’s doing very well, everyone and their brother from Spain is moving here.
Very odd but Germans are a nation of renters, not unusual to meet people who’ve rented the same place their whole life.
Best to get married then it sounds like! In the US we have a marriage Penalty tax. It’s crazy.
Interesting insight on renters vs owners. Might want to check that to corroborate. In US about 62% own.