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Since the OP started with blurring and sort of contrasting investment income and earned income . . . in general -- both earned income (money you work for) and unearned income (investment, interest, etc.) are subject to INCOME tax, unless they are specifically exempt.
However only EARNED income is subject to employment based tax, such as Social Security/FICA -- because, as Leona Helmsey got busted for saying -- only the Little People pay taxes.
But back to the concept of lowering your tax load . . . General concept is to minimize or do not engage in the taxable activity or event . . . and your taxes lower or go away.
Putting that into practice is the "trick," or tips you are looking for, correct?
Start with looking at the big picture of where you money comes and how it goes and see what you would go do different with taxes in mind --
A lot of folks' money goes to their housing. They "earn" the money. And pay income taxes, employment taxes, their employer has to pay taxes as well, and the home builder has to pay taxes for his workers and on the profits, and those workers have to pay taxes. That is a LOT of tax in just creating and buying a house.
Typical example real world folks can do as a route-around of those taxes -- build your own house. No tax on the money "earned" in building it, no taxes on the employment. Cuts a major portion of the cost out, and leaves the new owner with much less expenses to have to earn future income (again all subject to tax) to cover.
Works the same for food -- e.g. grow your own, cook your own, on and on.
Maybe think Amish, in short. Not that you need to ride in a black buggy, or dress "plain" but you just have to be a little creative and smart.
I get that people can have capital gains and pay taxes on that and skip "income" taxes, but are folks here doing fine without paying any taxes at all? How do you all do it? I think people create tax shelters or can lower their taxes with write-offs. Please share your techniques? I think much of it involves real estate. Also, I guess alternative minimum tax does not apply to these individuals. Once again, how do you folks do that? I'd like to get involved with not paying taxes. I bet you folks get others to pay your taxes. Clever, very clever.
My career field has a lot of business expenses; so I have written them off.
I have had a long selection of profitable 'hobbies'. So I file multiple schedule 'C's and 'F's.
We collect apartment buildings, which each go onto a schedule 'E'.
All of these things help to shelter our income from taxation.
Anyhow, there really is no way to avoid tax without having a low income and being very strategic about how you do things. For a family you can make up to 50k a year and get away with no tax if you do things very strategically, I can give you some examples if this is the sort of thing you are interested in hearing.
My career's salary peaked at $65k/year, I was able to keep it fully sheltered [1990 - 2000].
I get that people can have capital gains and pay taxes on that and skip "income" taxes, but are folks here doing fine without paying any taxes at all? How do you all do it? I think people create tax shelters or can lower their taxes with write-offs. Please share your techniques? I think much of it involves real estate. Also, I guess alternative minimum tax does not apply to these individuals. Once again, how do you folks do that? I'd like to get involved with not paying taxes. I bet you folks get others to pay your taxes. Clever, very clever.
If you work for a company that offers 401k - contribute the maximum ($15,500 for 2008), enrol in FSA (Flexible savings account), if you have kids, enrol in dependent care program, if you drive or use public transportation to work, enrol in TSA, health care insurance, vision, dental - by the time you deduct all of these, you AGI will be very low.
Contribute to traditional IRA
Buy rental properties plus your primary residence - deduct home owners insurance, HOA dues, property taxes, mortgage interest, PMI, maintenance, landscape, advertising, cleaning etc.
Charitable contributions, Excise tax and vehicle mileage if used in the course of taking care of the rental properties. At the end of the day, you will pay little or no tax at all.
Does anybody know if's true that if you don't ever work you don't pay taxes?
Well... taxes come in all forms... property tax, capital gains tax, sales tax, gasoline tax, etc... so, I think it would require more than not ever working...
Well... taxes come in all forms... property tax, capital gains tax, sales tax, gasoline tax, etc... so, I think it would require more than not ever working...
Only if you own no property and don't buy things (sales tax).
Does anybody know if's true that if you don't ever work you don't pay taxes?
In the context of income taxes, even if you had no 'earned income', if you had great Wealth and lived on investment income, you would have to file capital gains taxes [income tax].
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