Could you Enjoy a Non-Existent Income Tax Rate just like GE?
When the New York Times bankrupted the story of how General Electric has been making billions (no surprise there) but has not been paying precisely nothing in federal corporate income taxes and is even expecting a refund on no taxes paid (big surprise there), the average working stiff waiting in line to pay the IRS was clearly outraged. However, the outrage has conked out to a certain amount of grudging admiration. And people are starting to wonder if they can get that sort of understanding from the IRS. Is that actually possible?
Can you really get a 0% income tax rate without living on the street under a sheet of newspaper? Let’s see, shall we?
The easiest way to make that occur would be to really possess your own business – to be self-employed, as it were. If you own a small business as a contractor or something, or if you’re a consultant, pulling this off could be conceivable. Let’s arrange things up so that you possess your own business, and you make $1,40,000 in your first year. Now in you first year in business, the government drops you a bone – you get $10,000 written down as startup expenses. For each year after that, you can write off half as much. And then there is the area of creative accounting called legitimate business expenses. You can write these off. What precisely you could escape with calling a business expense is naturally something that tends to be sort of up in the air. You may claim that lots of varieties of purchases in your life were for your business – you can take a business interest in the slopes of Aspen and the beaches of Baja. All computers or smartphone you purchase. You may buy for your business but utilise it for individual purposes exactly the same. Business expenses, if you’re creative can conceivably facilitate you write down approximately $12,000 a year. We’re approaching those 0% income tax rate already.
How about the Social Security and Medicare taxes, you have to pay? Even GE pays these; somebody in business for himself, would have to pay both for the employer and for the employee. And that could sum up to something like $17,000 or so. However, even so, half of that, you can deduce from your taxable income. All of this does not look like much; but there is much good news you have in the tax breaks you get on your retirement and investment accounts. Begin a self-employed 401(k) and you’ll be able to put by something approximately $40,000 a year and write it off to. Does $40,000 seem like much? You get that a lot because if you are self-employed, you are both the owner and the ownee (to coin a word). As an employee, you reserve something for your 401(k); and as the proprietor of the business, you may contribute a really generous company match. When you’re your own boss, you could surely treat yourself alright.
There are lots of additional things you can do also to approach the 0% rate of interest. You could write off your mortgage interest, the premiums you pay for your family’s health insurance, whatever you pay in student loan interest, what you pay for your children’s college; there is the personal tax exemption you get for you and your wife that is worth $10,000. If you know what to do, tax time can be pretty fun.
