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It’s possible to pay $150 in taxes on an income of $150K

rootofgood.com

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Re: It’s possible to pay $150 in taxes on an income of $150K

#51

Post by bumbada »

They are just deferring taxes. Taxes will be paid anyway in the future.

In some ways I prefer to pay taxes now because you are free with your money and that is wealth in itself. A new crazy Bernie comes and changes the rules and you are f*ck$d with 30-40% of your savings disappearing in days by inflation, formal currency devaluation, new taxes and so on.

E.g If I were living in Peru today I will fly with my money as soon as possible with the new communistic guy in charge. Just hearing him talk in the past would be enough to take the decision.

Re: It’s possible to pay $150 in taxes on an income of $150K

#52

Post by lukevp »

andrewmcwatters wrote: post #36

I’m always amazed that people think 401(k)s are a great idea. Yeah, that’s exactly what I want, the government telling me how I can spend my money, until I’m almost ready to die, with no guarantee the laws governing 401(k)s won’t change along the way, or that some moron politician won’t siphon from my retirement.

401(k)s are privately managed. They were originally designed as a technique to replace pensions, and are separate from government-mandated savings like Social Security. How would a politician siphon from your retirement? A 401(k) is basically just an IRA that a company manages for you and pays someone to administer so that the deferred tax burden can happen. Or do you mean that in the future, taxes may go up? If that’s your belief, nothing prevents you from using a Roth 401(k) if your company offers it (my previous 2 employers both offered this).

Re: It’s possible to pay $150 in taxes on an income of $150K

#53

Post by SavantIdiot »

stu2b50 wrote: post #28
SavantIdiot wrote: post #13

The two biggest reducers he cites are 401k contributions and tax-loss harvesting. #1. 401k. While this is a great idea, if he's trying to retire at 33, putting 17.5k away from his 70k paycheck is not going to help because he can't touch it until he is 59.5 (w/o penalty). #2. Capital losses Tax-loss harvesting means selling securities that are underwater to get a capital-loss deduction. I don't know where to start exp…

>because he can't touch it until he is 59.5 (w/o penalty). That's not quite true. With 5 years of preplanning, you can get money out of a 401k without any penalty at any age (although, you will of course pay taxes on it) by doing a backdoor Roth IRA ladder.

I've not heard of that. So it goes from one IRA into another? Why? Plus, ROTHs have yearly limits of $6k. While it can be done I don't see the benefit of doing it, esp. given the tiny amounts (compared to what is needed for retirement).

Re: It’s possible to pay $150 in taxes on an income of $150K

#54

Post by andrewmcwatters »

Swizec wrote: post #40
andrewmcwatters wrote: post #25

Earlier quoted context omitted.

Yeah, for anyone reading who needs to read this: don’t do this. Unless you’re running a legitimate business, this is blatant tax fraud. Also $800/yr in California? You people are being ripped off. LLCs aren’t laid any fees to maintain annually in Arizona, and they’re perpetual entities.

Definitely not tax fraud. You’re allowed yo be bad at business if you can afford it. Afaik you are “running a legitimate business” as soon as you’re selling stuff. Even if it’s github sponsorships for your opensource projects or whatever. Fraud is what most people (probably) do — not report that income on your taxes.

You can’t just form an LLC and start writing off your home furnishings as a “business expense” because you make $5 a month from a browser extension that some people donate to your Paypal account.

That’s tax fraud. That’s literally what that is. It’s incredible that anyone would think otherwise.

Re: It’s possible to pay $150 in taxes on an income of $150K

#55

Post by rileymat2 »

RobRivera wrote: post #26
imajoredinecon wrote: post #4

The author has 3 children, and that's a _household_ income of $150000. 150 grand is not a huge family income to support 2 adults and 3 kids; as a country, we give people tax breaks to encourage having children and to help support people who make that choice. Calling this "Houdini-like" (author's words) tax hacking seems like a bit of a misunderstanding of deliberate social policy!

there is no such thing as loopholes and tax hacking, simply 'THE LAW' noone is beholden to pay more taxes than the tax code requires. anyone who uses emotional appeal to say otherwise wont help me when i need their help anyway so they can pound sand.

I think this will become a pedantic argument, but without defining loophole, we can’t say they exist or don’t.

Presumably a law is written with some intent. When that intent or spirit is broken because of poor construction or poor foresight in the text of a law, a lot of people call that a loophole. I think it is a fair definition.

Re: It’s possible to pay $150 in taxes on an income of $150K

#56

Post by stu2b50 »

SavantIdiot wrote: post #53
stu2b50 wrote: post #28

Earlier quoted context omitted.

>because he can't touch it until he is 59.5 (w/o penalty). That's not quite true. With 5 years of preplanning, you can get money out of a 401k without any penalty at any age (although, you will of course pay taxes on it) by doing a backdoor Roth IRA ladder.

I've not heard of that. So it goes from one IRA into another? Why? Plus, ROTHs have yearly limits of $6k. While it can be done I don't see the benefit of doing it, esp. given the tiny amounts (compared to what is needed for retirement).

You can rollover 401k money into a Roth IRA (but this is a taxable event and you will pay income tax on that - just a note because "Roth" in the name tricks people up). That money will count as a contribution (ie not a gain). There's also NO limit on how much you can convert.

You can withdraw any amount of contributions to Roth IRAs no penalty. But you have to wait 5 years for rollovers.

So basically

1. Pick how much money you'll need in 5 years

2. Rollover that much money from your 401k to a Roth IRA (pay taxes in this step)

3. 5 years later withdraw that money from your Roth IRA

Re: It’s possible to pay $150 in taxes on an income of $150K

#57

Post by pmorici »

bingidingi wrote: post #23

Holy shit, $500 a year for health insurance? I pay twice that a month and don't even get an HSA option. Seems weird to put so much into retirement funds if your plan is to retire in your 30s, the penalties of touching that before 60 are pretty substantial. I suspect there's some sort of inheritance of property or something they're not disclosing.

No, It's $500 + $6,450 so $580 a month plus an unspecified employer contribution. Because it is a HDHP with an HSA though they are incentivized to keep their costs in check and anything they don't spend of the $6k gets rolled over to the next year and once you hit retirement if you have a surplus at retirement age you can use the money like an IRA.

Re: It’s possible to pay $150 in taxes on an income of $150K

#58

Post by rejectedandsad »

lostcolony wrote: post #46
rejectedandsad wrote: post #16

Earlier quoted context omitted.

This will be the first year I’ll be making more than $150k, not looking forward to next April considering im still basically broke.

Why? Tax brackets are progressive, so even if you had moved up a bracket it wouldn't change the fact you're still making more money (i.e., you don't suddenly go from paying 24% to 32%; you just pay 32% of the money made above the 24% bracket). And given the 2021 brackets, if you're single, you haven't even moved up a bracket ($86,376-$164,925 is the 24% bracket), but even if it had, your effective tax rate barely cha…

I’ve never been able to contribute to an IRA.

But realistically for me the only change is I’ll owe instead of getting a refund on account of the withholding. Considering I don’t keep much in cash I’ll need to make some changes in a year.

Re: It’s possible to pay $150 in taxes on an income of $150K

#59

Post by bingidingi »

poundofshrimp wrote: post #42
bingidingi wrote: post #23

Holy shit, $500 a year for health insurance? I pay twice that a month and don't even get an HSA option. Seems weird to put so much into retirement funds if your plan is to retire in your 30s, the penalties of touching that before 60 are pretty substantial. I suspect there's some sort of inheritance of property or something they're not disclosing.

HSA has nothing to do with the quality of the insurance plan btw. HSAs are only available in conjunction with HDHP (High Deductible Health Plan). Typically, HDHPs are Bronze level plans that don’t provide a good coverage (which is why HSAs are allowed to supplement such plans).

I guess I'm just lucky; my plan has a high premium, high deductible, and no HSA.

Re: It’s possible to pay $150 in taxes on an income of $150K

#60

Post by Swizec »

andrewmcwatters wrote: post #54
Swizec wrote: post #40

Earlier quoted context omitted.

Definitely not tax fraud. You’re allowed yo be bad at business if you can afford it. Afaik you are “running a legitimate business” as soon as you’re selling stuff. Even if it’s github sponsorships for your opensource projects or whatever. Fraud is what most people (probably) do — not report that income on your taxes.

You can’t just form an LLC and start writing off your home furnishings as a “business expense” because you make $5 a month from a browser extension that some people donate to your Paypal account. That’s tax fraud. That’s literally what that is. It’s incredible that anyone would think otherwise.

Yes it’s generally frowned upon to have more business expenses than revenue for multiple years in a row.

But claiming your home office (a part of your home explicitly used for work) as a business expense is definitely not tax fraud.

You can’t claim your kitchen tho.

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