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Old 04-20-2011, 02:42 PM
 
Location: Nassau, Long Island, NY
16,408 posts, read 30,093,559 times
Reputation: 7281

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I am thinking of possibly moving to an area which has a local income tax (on top of State and Federal) because I want to leave an area with out-of-control property taxes. We are a two-income couple. I am interested in learning about ways to cut income taxes and, as it seems like business owners have the best tax breaks, maybe it is time to do something like that on the side.

I would greatly appreciate any experience, opinions, income tax strategies, etc., from people who work as employees and also have businesses on the side.
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Old 04-20-2011, 03:19 PM
 
28,461 posts, read 75,125,126 times
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Um, I think you need to do some more search. If you are earning a high income the various ways that property taxes are mostly working to your advantage almost certainly would outweigh any "savings" from moving to an area with local income taxes.

As to you belief that business owners have some magical ability to use tax breaks to their advantage it is similarly worth reminding that personal income taxes are paid ON INCOME and any tax break is merely going to allow for an adjustment to that INCOME only to the extent that you can show there were business related EXPENSES to produce that income, you have to MAKE A PROFIT from you side business for it to raise your taxes. Making a profit IS NOT EASY, and if you lose money for too long you will not only go broke but the IRS will call your business a scam... A simpler way to think about this is to say: IF my side business resulted in my NET INCOME GOING UP by $5,000 based on gross revenue of $10,000 because it cost me $5,000 to run this business and the tax code says I have to PAY ALL KINDS OF TAXES (like BOTH SIDES OF SOCIAL SECURITY on NET PROFITS, reducing them by 15.3%) on that "profit" I'm not "getting back" any of the $5000 I spent (on office space, car, client contact, computers, etc) I still have to pay taxes ON THE $5,000 at whatever income taxes there at FEDERALLY, STATE and LOCAL... So I am maybe keeping MAYBE $3000 of the GROSS proceeds of my "business"...

If I live in a place with NO income taxes I keep more of my profits. If I live in place with no property taxes the income taxes are going hit my higher earnings HARDER...
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Old 04-20-2011, 03:22 PM
 
11,281 posts, read 46,175,294 times
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Choosing a business venture primarily as a tax shelter is a poor strategy in view of today's tax codes. Your accountant would be the best source for quantifying the guidelines for your personal tax situation.

Choosing a business as a potential money making venture is tough enough, especially ... if I'm reading your post correctly ... to do this as a part time, on the side from real jobs, and not the focus of your attention.

I've started several business while employed by others ... and all took a serious committment for time and capital resources to become successful to the point of replacing my primary income at the time. None of them were going to be a "real" business without the substantial investment on my part, and they were business ventures that I knew the skills needed to perform the tasks. IMO, getting in to a business which you don't know just for the sake of getting a business so you can get write-offs will most likely be a serious drain upon your resources without an offsetting benefit.

FWIW, no small business owner I know is getting a free ride in the tax marketplace for their business, let alone enough tax deductions to make it worthwhile to pursue against other income streams. The last thing you want is your business to be declared a "hobby" for which you get no deductions at all ... you really have to show the IRS that you were serious about the effort to make the business productive.

The days of all those offshore tax shelter scams is long gone with a number of people having been convicted of serious crimes/tax evasion.
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Old 04-20-2011, 03:39 PM
 
Location: Nassau, Long Island, NY
16,408 posts, read 30,093,559 times
Reputation: 7281
TY both for weighing in.

See nothing is as "easy" as it looks from the outside.

You read about these tax perks like people writing off SUVs on their income tax, etc. Companies that pay absolutely no income tax whatsoever. You go out to eat with people who "pick up the check" and tell you they write every meal off their income taxes, and write off every trip they take too, etc.

If I could actually start a viable side business that would turn to a full-time income I am certainly not against that either.
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Old 04-20-2011, 03:42 PM
 
Location: Nassau, Long Island, NY
16,408 posts, read 30,093,559 times
Reputation: 7281
Quote:
Originally Posted by chet everett View Post
Um, I think you need to do some more search. If you are earning a high income the various ways that property taxes are mostly working to your advantage almost certainly would outweigh any "savings" from moving to an area with local income taxes.

As to you belief that business owners have some magical ability to use tax breaks to their advantage it is similarly worth reminding that personal income taxes are paid ON INCOME and any tax break is merely going to allow for an adjustment to that INCOME only to the extent that you can show there were business related EXPENSES to produce that income, you have to MAKE A PROFIT from you side business for it to raise your taxes. Making a profit IS NOT EASY, and if you lose money for too long you will not only go broke but the IRS will call your business a scam... A simpler way to think about this is to say: IF my side business resulted in my NET INCOME GOING UP by $5,000 based on gross revenue of $10,000 because it cost me $5,000 to run this business and the tax code says I have to PAY ALL KINDS OF TAXES (like BOTH SIDES OF SOCIAL SECURITY on NET PROFITS, reducing them by 15.3%) on that "profit" I'm not "getting back" any of the $5000 I spent (on office space, car, client contact, computers, etc) I still have to pay taxes ON THE $5,000 at whatever income taxes there at FEDERALLY, STATE and LOCAL... So I am maybe keeping MAYBE $3000 of the GROSS proceeds of my "business"...

If I live in a place with NO income taxes I keep more of my profits. If I live in place with no property taxes the income taxes are going hit my higher earnings HARDER...
TY for your answer! Scary to say but where I live the property taxes are quite brutal (Nassau County, NY) and they are not that much of a help as a tax shelter as in parts of the country where property taxes are more "normal."
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