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The way it works is that you pay yourself for the position you work in your company... if you take a position in the company (you could just opt to be an owner only, but that's unlikely unless it's a partnership).
So if I'm the owner of a company with a cashflow of $150k, but play the role of project manager, and project managers W2 salaries are only around $60,000, I can pay myself just that. Then take the rest in profits (after employer contribution to 401k, ofcourse.
What do you mean by "take the rest in profits"? If you're a pass-through entity that its going to be taxed just like any other income, on the other hand if your a corp its going to result in double taxation.
interesting tangent to this would be....if this is true, why does everyone cry foul so loudly about raising taxes on those making >$250k/yr as to how it would kill small business owners? kinda funny. maybe they all need to talk to you and learn how to properly manage their books so they can avoid taxes (legally) just as you do and they can stop with the falsehoods? anyways...that's a different thread.
The "crying foul" is just nonsense, it has nothing to do with business and everything to do with wealthy folks wanting to pay less taxes. Ironically higher marginal taxes create incentives to invest, hire new people, etc.
The wealthy are in a difficult situation, they are vastly out-number and they have to spread nonsense to keep the proles from reaching into their pockets. They are playing a dangerous game...that never ends in their favor.
Right, $16k federal. I'm assuming modest contributions to a 401(k), a modest mortgage, etc. Taxable income should be around $75~$80k and your total tax will be $15k~$16k.
Nope, its a private policy via Anthem Blue here in California. Its a HSA compatible plan with a $3,000 deductible. The premium would actually be cheaper if I didn't have a pre-existing condition.
you didnt assume anything in deductions in the example you gave or you would have said it. . you merely made a statement about the taxes on 100k and guessed wrong. period. no big deal
What do you mean by "take the rest in profits"? If you're a pass-through entity that its going to be taxed just like any other income, on the other hand if your a corp its going to result in double taxation.
Taking profits means subtracting the expenses from the gross revenue, and distributing it to the owner(s).
Correct. Neither being a pass-through entity or a corporation will work to carry out this plan. Electing how your business is taxed is one of the most critical decisions you can make. This is well explained in the IRS tax code (available at www.irs.gov) or any intro to business class.
Taking profits means subtracting the expenses from the gross revenue, and distributing it to the owner(s).
This isn't explaining anything....
Quote:
Originally Posted by NJBest
Correct. Neither being a pass-through entity or a corporation will work to carry out this plan. Electing how your business is taxed is one of the most critical decisions you can make.
Again..not explaining anything. A business is either a pass-through entity of some form or a corporation....in either case the profit is taxed.
you didnt assume anything in deductions in the example you gave or you would have said it. . you merely made a statement about the taxes on 100k and guessed wrong. period. no big deal
What in the world are you talking about? I never stated what I was assuming, I was merely considering what the average individual making $100k would pay. It should be obvious that I'm not suggesting that every individual making $100k is going to pay $16k in federal taxes, again, I was just considering the typical case. Your case of no deduction beyond the standard deduction and personal exception is not typical at all....
Again..not explaining anything. A business is either a pass-through entity of some form or a corporation....in either case the profit is taxed.
Did you think I wasn't aware of the IRS website?
I'm not saying that the profits aren't taxed. The profit share that the company puts into your 401k is not taxed. That's no tax on $32,500 from what would be your highest bracket.
To pull this off, you have to be a partnership... preferablly an LLC elected to be taxed as a partnership. That way you report on Form 1065 and Schedule K.
I'm not saying that the profits aren't taxed. The profit share that the company puts into your 401k is not taxed. That's no tax on $32,500 from what would be your highest bracket.
Right, employee benefits are deductible by a business. But I'm asking you about your comment that "you take the rest in profits" in relation to taxes, that doesn't avoid any taxes. The profit is either going to pass-through to the owners or its going to be taxed at the entity level and then paid via dividends.
Quote:
Originally Posted by NJBest
To pull this off, you have to be a partnership... preferablly an LLC elected to be taxed as a partnership. That way you report on Form 1065 and Schedule K.
To pull what off? Why a partnership? Previously you said it wouldn't work with a pass-through entity, yet now you're mentioning partnership taxation which is pass-through.
Detroit is in the state it is in because of the huge reliance on Automobile manufacturing in that area. The New York Metro area has a lot of presence with financial firms, but there are numerous other types of business in and around the NY Metro area.
There were other types of businesses in the Detroit area as well, the decline in the auto industry was just the catalyst. Detroit wasn't the only high growth city in that era to decline. People living in Detroit, Pittsburgh, etc during their growth era would say the same things you are saying about NYC....
Quote:
Originally Posted by bradykp
sure, they may not buy a home when they are 25, like our parents did, they may rent until their late 20s and then buy....but with many college-educated folks moving out here and starting their careers in the $50k+ salary range, with bonuses and raises...i see no reason why the current already adjusted home values are not sustainable.
Of course you don't, you just bought a house. But the numbers don't work out, the salaries in the younger generations can't support current evaluations in the Northeast, West Coast, etc even if everyone with a salary greater than $100k moved to these areas. Only 15% of households make more than $100k/year, but most of these households are older folks.
The environment that our parents purchased homes it was much different, they purchased homes back when the prices were reasonable and gained from rapid appreciation for 2-3 decades. That was a generational event, the boomer cohort bid up real estate by continuously upgrading their properties and now they have paper equity. Unless you believe that you can't get something for nothing, that paper equity as a whole will vanish.
Sorry, you're not going to be able to use your home as an ATM, its going to be a money pit.
What in the world are you talking about? I never stated what I was assuming, I was merely considering what the average individual making $100k would pay. It should be obvious that I'm not suggesting that every individual making $100k is going to pay $16k in federal taxes, again, I was just considering the typical case. Your case of no deduction beyond the standard deduction and personal exception is not typical at all....
what deductions beyond the standard deduction are typical?
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