161–170 of 323 posts
> Americans in the top 1 percent, and especially the top 0.1 percent, have seen their wealth and income multiply in recent decades as the rest of the country’s share of the economic pie shrank. Since 2000, a recent study found, the top 1 percent have made those gains almost entirely on income from capital, especially corporate stock—not on labor income. One reason may be the financial options of the wealthy: Business…
> You owe the IRS about $38,500 more, assuming each of us pays the maximum with no special deductions. This also assumes the investor has no interest income, which would be unlikely. For a younger person with a big nest egg, this wouldn't be a huge chunk of their assets. But as you age you'd want to shift into less-risky assets, like interest-bearing ones. Also, investors would probably be diversified into real estat…
To clarify: Social Security benefits are calculated based on the 35 highest-earning years you report to the IRS, up to a maximum cap. You will _not_ "run out" of benefits at any point, but if you report under 35 years of earned income to the IRS, those zeros will play into the overall calculation of your benefit rate.
> Americans in the top 1 percent, and especially the top 0.1 percent, have seen their wealth and income multiply in recent decades as the rest of the country’s share of the economic pie shrank. Since 2000, a recent study found, the top 1 percent have made those gains almost entirely on income from capital, especially corporate stock—not on labor income. One reason may be the financial options of the wealthy: Business…
Ok, I'm not getting something here, how does incorporating a corporation at age 25 reduce your taxes if you're still a salaried worker in another company for example?
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^^^ this. In fact in the US the IRS will flag abnormally high salaries for small businesses (millions per individual) if no or very few dividends are paid out because income tax is less favorable to the government in the total amount the IRS receives when looking at multi million dollar salaries. Beyond the first $110kish FICA stops making a dent as social security caps out. I'm sure there are possible loopholes for…
People often forget about S-Corps. As the owner you W-2 yourself, then what is "left over" is a dividend. Since an S-Corp is a pass-through entity, you don't pay corporate taxes, and aren't getring the C-Corp double tax on your dividends. On the dividend, you don't end up paying toward FICA. Effectively saving you up to 15.3%. IRS rules stipulate you have to be paid a "reasonable" compensation, which most accountants…
You are saying if you ran a 1 man SAAS app and made 200k in a year, you would w2 yourself for 30k and take a 170k dividend?
I am not sure my accountant would like this plan. Taking say that 90k or 100k might be plausible, but 30% of the average wage?
(And at the 90k point.. FICA goes away past 110k anyway, so the savings is fairly minimal)
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Tax shelters are not made for people like you. The middle class is best served by collective bargaining to increase their wages and benefits, strong consumer protections, and access to affordable health care. Up to about your first 5-10 million (depending on where you live) you need to play by the rules. After that, you can think about hiring a tax advisor to start scamming the system. But the downmarket financial ad…
The OP mentioned starting their strategy when they were 25, implying they are/were a "normal" person, which is why I asked, since my vague understanding of the situation in the US matches what you describe, that you have to have gobs of money to begin with before you can really start gaming things.
1. Buy house
2. Rent out rooms
3. Deduct all expenses that you'd have to pay anyway, utilities, internet, etc. as "business expenses".
4. Depreciate house
5. Renovate the house and depreciate the new fixtures/additions/etc.
6. Reappraise the house after a certain time and refinance.
7. Take money out after refinancing and buy more property.
Go back to (1).
It's pretty much foolproof. The tough part is being an owner-occupied landlord for a bit to get to the point where (6) is worth while. You also have to be in a hot market.
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Could you link to any "for dummies"-type resources that show how you can incorporate and use that corporation to reduce your taxes? Something that would hopefully be applicable to your typical middle-class homeowner in their 30s with young kids and a 9-5 making enough to get by but is looking for any edge they can find? Edit: (in the US)
Tax shelters are not made for people like you. The middle class is best served by collective bargaining to increase their wages and benefits, strong consumer protections, and access to affordable health care. Up to about your first 5-10 million (depending on where you live) you need to play by the rules. After that, you can think about hiring a tax advisor to start scamming the system. But the downmarket financial ad…
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I've heard the former but I have never heard the latter unless it's been one of my friends in PE trying to justify it. It's the investor's job to make sure their investments are producing an adequate risk-adjusted return, not the government's job to help you get there.
Taxes change the expected value of an investment. Thus, it changes the amount of risk v reward. If I have you 51% odds on a coin flip, that's a good bet. But if you only get paid out 60% when you win, it's a bad bet.
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Yes. But that's because there is so little data and so many confounding variables There is little empirical evidence for everything in macroeconomics, including for Saez's claims.
Wait, did you really just say, “I acknowledge there is no evidence” immediately followed by “there is no evidence for the absence of evidence”? If I’m not missing something you though was implicit somehow, that is some pretty remarkable logic.