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Business deductions are not illegal and not loopholes, and self-employed business owners pay a higher tax RATE, but it's counteracted with more deductions. If you're self-employed you have to pay a self-employed tax (and you can't deduct from that tax with things like HSA accounts), but often you can deduct "hybrid/gray area" business/personal expenses.
But anyone who is earning wages is paying a high tax, as others have said, the real reason rich people don't pay much tax is because a lot of their earnings are long term capital gains, not earned income, and subject to a 15% tax rate.
I must be one of the stupid ones.
FWIW... I consider myself to be middle class...
My Taxable income was about $210k last year, plus maxing out my 401k.
I have ZERO deductions, I rent, everything is paid for, I receive no tax credits. I am single.
I put about $30k a year in two 529 accounts, which I receive NO immediate tax benefits.
I have filed short form for the last 10 years. I either write a small check, or I get a small check back every year.
Just going from memory, I paid over $50k in fed. taxes last year. I have not filed my 2009 returns yet, so I dont know what my tax burden was last year.
someone please tell me how to pay less taxes legally.
Unfortunately, the facts rather disprove your theory.
Top 10% pay 73% of tax. Bottom 40% get money back.
This is true, somewhat... The $346K threashold the article gives, is not really "rich." It's not really middle class (depending on where you live), but I wouldn't classify it as rich. Which kind of leads back to my theory, the truly rich make the laws. By rich I'm talking people who make millions. They want to pawn as much tax burden off on other people, so they attack the upper middle class...
I must be one of the stupid ones.
FWIW... I consider myself to be middle class...
My Taxable income was about $210k last year, plus maxing out my 401k.
I have ZERO deductions, I rent, everything is paid for, I receive no tax credits. I am single.
I put about $30k a year in two 529 accounts, which I receive NO immediate tax benefits.
I have filed short form for the last 10 years. I either write a small check, or I get a small check back every year.
Just going from memory, I paid over $50k in fed. taxes last year. I have not filed my 2009 returns yet, so I dont know what my tax burden was last year.
someone please tell me how to pay less taxes legally.
you are in the top 5% of wage earners based on AGI, which wouldn't be considered middle class.
here is a statistic that i found mind boggling:
According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% of Americans receive $100,000 or more in inheritance. Another 1.1% receive $50,000 to $100,000. On the other hand, 91.9% receive nothing.
In some ways the "Rich" however they are defined are being set up to be scapegoats...
Most of us just try to provide for our families and work so our children will have opportunities we don't.
There will never be enough rich people to tax... just not possible.
There is a real problem when a large segment of the population doesn't pay Income Tax.
I still manage a few rental properties and one of the tenants called to see if I could come right over to change a porch light... I told her that I would be tied up today working on taxes... she is 41 years old and has never paid income taxes.. has three children and two grandchildren... she said she should have know it was tax time because people always seem grumpy at tax time.
Last edited by Ultrarunner; 04-11-2010 at 03:53 PM..
Reason: typo
you are in the top 5% of wage earners based on AGI, which wouldn't be considered middle class.
here is a statistic that i found mind boggling:
According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% of Americans receive $100,000 or more in inheritance. Another 1.1% receive $50,000 to $100,000. On the other hand, 91.9% receive nothing.
i am still not sure i believe it.
Probably assets were transferred or "sold" to the beneficiaries before the death of the original owner? Just a guess.
First of all, it isn't fraud if they are legitimate expenses. Secondly, the IRS is very strict with business expenses and someone who is self-employed is much more likely to get audited than an employee is. Thirdly, it isn't a fair comparison as the self-employed have expenses that employees do not have. For example, they don't get subsidized health insurance, paid sick leave, pension and other benefits or paid vacation that most employees get but do not pay tax on.
Correct and we also pay the full boat of SS and medicare taxes which add up to quite a bit. The SE tax is 15.4% if I recall and W-2 people only pay half.
In my situation as a self employed consultant, I drive 250-500 miles one way to the work site so my situation is a bit different than a W-2 employee driving a few miles to work. I also have expenses like food and other minor travel expenses. I also don't get 401K and subsidized health insurance.
There is a lot more to it as a self employed person than Mr. Joe W-2 that turns up on main street at the office 9-5 monday through friday. If I do get a few tax deductions my way then so much the better.
Ultimately no matter what I think we can do without 57000 pages of tax code.
Correct and we also pay the full boat of SS and medicare taxes which add up to quite a bit. The SE tax is 15.4% if I recall and W-2 people only pay half.
In my situation as a self employed consultant, I drive 250-500 miles one way to the work site so my situation is a bit different than a W-2 employee driving a few miles to work. I also have expenses like food and other minor travel expenses. I also don't get 401K and subsidized health insurance.
...
Neither do a BOATLOAD of at-will employees in this "free" country of ours. Join the club.
I looked at that link to the IRS site. Looks to me like the top ~20% pay 75% of the income taxes. In particular, those in the 100-500K range pay an equal share of taxes as those in the 500k+ range. That leaves the remaining 80% of the employed to pay only 25% share to those under 100K. I have no idea what number crunching the IRS does there, but if the top 1% are paying nearly 40% of the total take, I'm not sure what people are complaining about.
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