How much to put aside for taxes (1 Viewer)

[jrdbrn]

I'm pretty sure you have to pay self employment tax on that income? That adds 15% plus your regular fed income taxes. And if your in LA don't for get another 4-5% for state tax. Depending on your income it could be way above 30%.

We are not wealthy

 

[The Mongoose]

Isn't every expense of the self-employed a business expense?

If you could make that hold up in court, you'd be in a higher tax bracket.

 

[Dre]

Isn't every expense of the self-employed a business expense?

My God I wish.

 

[dtc]

Isn't every expense of the self-employed a business expense?

Yes. Absolutely.

 

[jrdbrn]

I've been reading there's deductions to bring the 15% self employment down to 7ish%. My tax lady must be on vacation because she hasn't emailed me back in a few days.

 

[superchuck500]

I've been reading there's deductions to bring the 15% self employment down to 7ish%. My tax lady must be on vacation because she hasn't emailed me back in a few days.

Just remember that is tax on top of your bracketed tax for ordinary income.

 

[jrdbrn]

Just remember that is tax on top of your bracketed tax for ordinary income.

Right. It's a shame, but it's the price to pay to be "free"... hah

 

[dtc]

My wife began selling real estate. She sold just 3 properties this week so we need to start thinking of taxes. Her broker told her 18%... my boss said 30%.

Not looking for exact, just looking for a little more definitive of an answer.

Have your wife set up an LLC and have her real estate contract pay her to the LLC. From the LLC, make her an employee and pay her a paycheck with taxes withheld so that you're paying SS instead of self employment tax. I believe you'll have to set the LLC to function as an S corp but then you should be able to expense many of the costs you'll incur and avoid self employment tax.

Your accountant should be able to set up the LLC for nearly nothing. I believe a Nevada or Wyoming LLC is the sort that would be the best for you, but that's something you'd need to clear with your lawyer and accountant.

 

[st dude]

We are not wealthy

First of all, congrats on your wife's new job and success. We have a friend who startedin real estate later in life. In just a few years she became top seller for her company. Some people have a knack for selling.

I agree with those who suggest 25%. It's more than you need to put aside for taxes, but you can take the overage and invest it in savings. Americans are in general poor savers. It's very hard to survive on social security. Dollars saved and invested when you are young can grow quite dramatically over time.

And insofar as not being wealthy, that's truly a relative term. Your income probably puts you in the top 1% of earners worldwide. In the US we have people we consider impoverished who have cars, tvs, phones and even houses. In Ethiopia and Somalia only 3 in a 1000 people own vehicles. In Peru and Ecuador it's only 70 in a 1000.

So I know what you mean when you say you do not consider yourself wealthy, but it depends as compared to who. We really take it for granted how lucky we are to live in the US where even our truly poor people would be rich if compared to world metrics.

https://www.google.com/url?sa=t&sou...ld.asp&usg=AFQjCNFb0_slNV2EMEPLcerSs5B2jf80xQ

 

[Dre]

Have your wife set up an LLC and have her real estate contract pay her to the LLC. From the LLC, make her an employee and pay her a paycheck with taxes withheld so that you're paying SS instead of self employment tax. I believe you'll have to set the LLC to function as an S corp but then you should be able to expense many of the costs you'll incur and avoid self employment tax.

Your accountant should be able to set up the LLC for nearly nothing. I believe a Nevada or Wyoming LLC is the sort that would be the best for you, but that's something you'd need to clear with your lawyer and accountant.

Are you saying there is a way to avoid paying full payroll taxes if you're self employed? Because I'm self employed and I always pay both the employee and employer portions for myself. Even a small break would be amazing...

 

[dtc]

Are you saying there is a way to avoid paying full payroll taxes if you're self employed? Because I'm self employed and I always pay both the employee and employer portions for myself. Even a small break would be amazing...

No, but by making yourself an employee you have at least the off chance of receiving SS benefits and runniing expenses through the business that would offset your actual income.

 

[JimEverett]

I've been reading there's deductions to bring the 15% self employment down to 7ish%. My tax lady must be on vacation because she hasn't emailed me back in a few days.

Yes - you can deduct the "employer" part of the self-employment tax. That percentage of the self-employment tax will depend on how much income is subject to the S-E tax.