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not much a good accountant can do about salary, common myth that anyone who is rich can magically make their tax bill next to nothing. When you're getting W-2 income there really isn't a whole lot to shelter it. Maybe a deferred comp plan, if the company offers one, but that's just kicking the can down the road.
Another common myth is that there are high return perfectly safe investments that are only available to the wealthy. Bernie Madoff made use of this belief in his Ponzi Scheme.
Deferred Compensation plans do kick the tax can down the road, but in the meantime, you are earning money on the invested deferred taxes. Also, the Ohio and federal income tax rates have been decreasing (despite the predictions of numerous pessimists) so that these deferred taxes will be at a lower rate than at the time they were deferred. My prediction is that Donald Trump will be re-elected, making us safe from federal income tax increases through 2024.
Are most people making more than a million a year on a W-2? How many are consultants, in sales, etc. who can claim a large portion of their income as business expenses?
Kicking the can down the road can be very beneficial if you start to pay those taxes at 71 after your working days are long gone. IRA RMD's only amount to about 4% of your balance and can be extended to age 96. If you don't live to 96 your heirs pick up the RMD schedule.
The thread was about people whose salary is more than a million a year, which I always associate with being W-2. Consultants who are independent contractors, if they have expenses against that income, then what they actually made is less. So they pay tax on the lesser amount. Sales people who are W-2 can no longer deduct unreimbursed business expenses so that's a moot point.
As for deferred comp, yes it can be beneficial. IRA's don't offer a lot of deferral for people making 7 figures so really the only option is nonqualified deferred comp. This has to be offered by an employer, you can't do it on your own, and you're stuck with what the plan design is. What investments are offered for the money deferred? Are you comfortable being an unsecured creditor of the company, if they go bankrupt you stand in line with everyone else. How long after retirement can you take payout? Your deferral of the compensation also defers the company's tax deduction, not something they want hanging around their balance sheet forever. What happens if the company is taken over? Normally the deferred comp will be fully paid in a change of control scenario which could bunch up all of that income in a year that's not convenient for you. You also run the risk of higher tax rates when the funds are paid out. May not be a great risk in the near term but in the longer term it's a definite possibility.
As for the article you linked, only one was relevant to salaried individuals and the article says it's already been eliminated.
Another common myth is that there are high return perfectly safe investments that are only available to the wealthy. Bernie Madoff made use of this belief in his Ponzi Scheme.
Deferred Compensation plans do kick the tax can down the road, but in the meantime, you are earning money on the invested deferred taxes. Also, the Ohio and federal income tax rates have been decreasing (despite the predictions of numerous pessimists) so that these deferred taxes will be at a lower rate than at the time they were deferred. My prediction is that Donald Trump will be re-elected, making us safe from federal income tax increases through 2024.
I don't disagree, but I think there is risk of higher rates beyond that. Unfortunately you have to plan that far ahead with these plans.
Kicking the can down the road can be very beneficial if you start to pay those taxes at 71 after your working days are long gone. IRA RMD's only amount to about 4% of your balance and can be extended to age 96. If you don't live to 96 your heirs pick up the RMD schedule.
At today's tax rate, I suggest a mix of Roth and tax deferred plans. When my wife and I were working, the federal tax rates were much higher and Roths were not generally available to us. So, we maxed out our 401Ks, which was beneficial tax-wise. But now those increased RMDs bring us additional costs to taxes. Next year, my wife and I will pay 2 1/2x the usual Medicare premium and 3x the Part D drug plan premium (total, about $6,400).
Everyone needs to look at their own situation and decide what will work best for them.
Brain surgeon, pro athletes, CEO's, top lawyers in the country, top tier actors, and the like. There aren't that many people that earn a million a year in income.
The people who foam at the mouth about taxing the rich more would be a rude awakening to find out how few people that would actually impact. That's why it's never anything more than political talking points to brain wash dumb people and never something that gets voted into place in the House and Senate.
It isn't the amount of people that need to be impacted, it's by how much they would be impacted. As far as taxing salary/wages goes, that's meaningless. To tax the rich appropriately, you need to take away their largest advantage and equalize the playing field.
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Originally Posted by skeddy
exactly .... many dolts have no clue, they just whine that life ain't fair....
Life isn't fair. I make over $250k a year which means I'm in the 24% tax bracket since I'm married and the wife doesn't work.
Now look at someone like Jeff Bezos, who is the richest man in the world, making only $81k per year as his salary. His money comes from his stock holdings, and the capital gains tax rate currently sits at 15%. That is the why the rich get richer, because they're not being taxed anywhere near what the rest of us are.
The capital gains tax rate should be raised for those making over $1 million a year. It used to be as high as 28%, and now is either 15% or 20% depending on your circumstances. That is far lower than what most of the middle class pays as a tax rate.
Another common myth is that there are high return perfectly safe investments that are only available to the wealthy. Bernie Madoff made use of this belief in his Ponzi Scheme.
Just because you do not know about them does not mean they do not exist.
They're called "private placements" and to be eligible to invest in them, you need to demonstrate you are an accredited investor (you have to prove you have a high income level and asset level.) Only the rich qualify for this.
Now, are the investments perfectly safe? Of course not, no investment is without some risk. But when you look at who these private placements are offered to (some of the wealthiest people in the world, along with large brokerage firms with lots of financial backing) they aren't interested in ventures that are shaky or dodgy. These kinds of deals ARE generally pretty safe to generate a return, and none of them are ever scrutinized by the SEC because they don't even have to be listed to be offered.
Just because you do not know about them does not mean they do not exist.
They're called "private placements" and to be eligible to invest in them, you need to demonstrate you are an accredited investor (you have to prove you have a high income level and asset level.) Only the rich qualify for this.
Now, are the investments perfectly safe? Of course not, no investment is without some risk. But when you look at who these private placements are offered to (some of the wealthiest people in the world, along with large brokerage firms with lots of financial backing) they aren't interested in ventures that are shaky or dodgy. These kinds of deals ARE generally pretty safe to generate a return, and none of them are ever scrutinized by the SEC because they don't even have to be listed to be offered.
Private Placements (generally speaking) are only available to accredited investors because they are very risky and the securities laws don't want them marketed to people without the means to evaluate the investment opportunity themselves and withstand the loss of capital if it doesn't work out.
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