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Started By
Message
How can I reduce my taxable income?
Posted on 4/16/12 at 11:39 am
Posted on 4/16/12 at 11:39 am
I just paid close to 40K in taxes. My wife and I have an IRA and contribute the 5K each per year. We do traditional so we can not pay taxes on it now. I am self employed and looked at a Simple IRA, but it does not seem like that good of a deal. We also have an HSA. What else can I do to reduce my taxable income? 40K is way to much.
6
Posted on 4/16/12 at 11:44 am to ColdDuck
Make less money
Realize losses on schedule D income
Annuities
Are you just experiencing a short period of high income? If not, you should just accept that you will pay taxes when you make money. Taxes aren't going down any time soon.
Realize losses on schedule D income
Annuities
Are you just experiencing a short period of high income? If not, you should just accept that you will pay taxes when you make money. Taxes aren't going down any time soon.
Posted on 4/16/12 at 11:44 am to ColdDuck
Do you have a SEP? Do you have any kids? You can gift them 12k a year and they will be taxed at the lower bracket.
Just a few off the top of my head. This thread has serious potential though. I hope others weigh in.
Just a few off the top of my head. This thread has serious potential though. I hope others weigh in.
Posted on 4/16/12 at 11:45 am to ColdDuck
Add about $7,000 to that and you have my salary for a year. 
Posted on 4/16/12 at 11:53 am to OnTheBrink
I started my own IT business about 4 years ago... I take home a nice amount. But I pay about 10K on each of my quarterly estimated payments. I get about 4K back at the end of the year. The income is pretty stable, so I really need to think about a way to lower my taxable income without treating the Money Board to a tailgate party that I can write off... 
So if I GIFT my kids, they would have to file their own return? I rather give them money than the IRS.
I have not looked into a SEP yet, but my investment guy mentioned the Simple IRA.
I was thinking about "paying" my wife, but we file jointly and it would be income for her and expenses of the business. The business is an LLC with passthrough taxation so that would not work.
So if I GIFT my kids, they would have to file their own return? I rather give them money than the IRS.
I have not looked into a SEP yet, but my investment guy mentioned the Simple IRA.
I was thinking about "paying" my wife, but we file jointly and it would be income for her and expenses of the business. The business is an LLC with passthrough taxation so that would not work.
Posted on 4/16/12 at 11:53 am to ColdDuck
sep ira
Posted on 4/16/12 at 11:55 am to ColdDuck
"Company" cars etc if not already using them. IE ways to reduce the company income/profit. Do you own or rent office space?
I'm in now way advocating doing anything crooked by the way.
I'm in now way advocating doing anything crooked by the way.
This post was edited on 4/16/12 at 11:59 am
Posted on 4/16/12 at 11:56 am to ColdDuck
SEP IRA...basically just like a T-IRA, but specifically for self-employed people, and it has higher limits
Posted on 4/16/12 at 12:07 pm to JPLSU1981
But I have an employee and may get another one. Now I have to contribute for them?
Posted on 4/16/12 at 12:09 pm to LSU0358
I rent space... all that gets written off as expenses. I do mileage rather than car writeoffs since I get more on teh mileage side.
I do all the usual write offs, meals, office stuff, telecom, advertising, postage, blah, blah...
I do all the usual write offs, meals, office stuff, telecom, advertising, postage, blah, blah...
Posted on 4/16/12 at 12:30 pm to klewis
So if I do a SEP IRA... I see that the employees must be working for at least 3 years. Currently I have no one over a year yet. So does that mean I can start a SEP IRA and not have to allow my one employee into the plan yet?
Posted on 4/16/12 at 12:35 pm to ColdDuck
IRS SEP IRA rules
quote:
An eligible employee is an individual who meets the following requirements:
attained age 21;
has worked for the employer in at least 3 of the last 5 years;
has received at least $550 in 2011 and 2012 (subject to annual cost-of-living adjustments in later years) in compensation from the employer for the year.
This post was edited on 4/16/12 at 12:37 pm
Posted on 4/16/12 at 12:40 pm to ColdDuck
quote:
I do mileage rather than car writeoffs since I get more on teh mileage side.
Good call. The reason I ask is a friend of mine had a small business going and wasn't paying mileage nor did he have a company car.
quote:
I rent space... all that gets written off as expenses.
Buying a space could knock down the taxable income. If possible, with more space than you need and rent out the rest.
This post was edited on 4/16/12 at 12:41 pm
Posted on 4/16/12 at 12:47 pm to LSU0358
quote:
Buying a space could knock down the taxable income. If possible, with more space than you need and rent out the rest.
Well that is a thought! I may have to look into this.
Posted on 4/16/12 at 2:15 pm to ColdDuck
rent = expense, buy = deprecation. Don't think you can go buy a building and reduce your taxable income to 0.
Posted on 4/16/12 at 2:34 pm to kfizzle85
Start a 401K, put the max amount allowed for you and your wife and don't do any matching. That's the cheapest way I can think of to reduce your AGI and put more money away.
Posted on 4/16/12 at 2:43 pm to I Love Bama
quote:
Do you have any kids? You can gift them 12k a year and they will be taxed at the lower bracket
What?
Posted on 4/16/12 at 2:46 pm to kfizzle85
The guy that handles out retirement bought a building in his personal name and he rents it out to his business. He charges himself $5,000/month, and he pays 20% (I think) tax on that $60K instead of his regular tax rate since it's 'rental income'. I aspire to be able to do something like this one day.
Posted on 4/16/12 at 2:47 pm to LSUGUMBO
Rental income is income - it doesn't not have any special rates.
ETA: And how big is the building? He needs to be paying himself a legitimate comparable amount per square foot (as compared to office space around the area).
ETA: And how big is the building? He needs to be paying himself a legitimate comparable amount per square foot (as compared to office space around the area).
This post was edited on 4/16/12 at 2:54 pm
Posted on 4/16/12 at 3:02 pm to krehn11
he is talking about paying income tax on the rental income vs income tax plus self-employment tax.
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