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Originally Posted by Lenny2
Yeah the payroll tax break is a big one.
If you're an LLC you can pay yourself a salary of say 50K, on which you have to pay the 15.3% payroll tax (social security and medicare) and the rest of your money you can take as a "dividend" which is subject to income tax but not the payroll tax.
I save 9-10K a year in taxes being set up this way.
Also if you're an LLC you can set up a single person 401K and fund it with up to 40K per year tax free. (Check with your accountant for the exact number..I'm pretty sure it's in the 40K range)
All of the tax benefits out there these days are meant to encourage savings, so if you're looking for a way to make a bunch of cash to spend you're S.O.L. But if you're willing to save for the long term you can avoid a lot of taxes.
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I do this but I was told 15% of my earnings is the cap on keogh/ira/401 like thing). So $7500 in your example.
The other thing that was suggested is a annuity. Fund it now and at least it grows tax free until I need it.
And for the person above. I have passive income. It is not any easier to shelter.