Is A LLC Taking Half My Money In Taxes?
if I make 100,000. and I am in the 35% tax bracket that means I hav 65,000. Then I would pay 15.3% self employment tax. making my take home 55,000. Is this correct. that is half of my money. somebody tell me is this is correct.
Your logic is correct. Also, consider state taxes, if applicable, which may put your tax over 50%. However, tax is based on your taxable income, not gross income. So, if you make $100,000, your taxable income would be something lower than that. Also, taxable income of $100,000 would likely put you in a 25-28% tax bracket, depending on filing status, not 35%.
thanks for all of the comments. they helped
Quote:if I make 100,000. and I am in the 35% tax bracket that means I hav 65,000. Then I would pay 15.3% self employment tax. making my take home 55,000. Is this correct. that is half of my money. somebody tell me is this is correct.
jscott42,
Not quite correct.
First, if you only have $100K in taxable self-employment income, that is your only income, and you are a single taxpayer, then the highest tax bracket you can be in is 28%.
Second, the income tax is progressive. If you are in the 28% bracket, then the first dollar is taxed at a lower rate than the last dollar earned. A portion of your income is taxed at 10%, a portion at 15%, a portion at 25%, and the last increment of your income is taxed at 28%. So for $100K of taxable self-employment income, your ordinary income tax will work out to something like $22506.
Third, self-employment income tax is really the social security and medicare withholdings paid on your gross (salary) income before deductions for income tax. For $100K of self-employment income, your SE tax will be $15300.
So, you see, in the worst case, it is not as bad a picture as you painted since you have $62194 left of your $100K self-employment income after taxes. It gets better after taking your itemozed or standard deduction and a personal exemption.
State income taxes are in addition to the federal taxes we discussed.[ Edited by NewKidinTown2 on Date 07/01/2005 ]
Quote:Also, you can choose to elect to have your LLC taxed as a corporation, in which case you would pay 15% on the first 50k and 25% from 50k to 100k and pay SE tax only on the amount you withdraw as salary. Mantis,
My tax tables for 2005 say that C-Corp is taxed at 15% on first $50K of income, at 25% on the next $25K, and then 34% on income between $75001 and $100K.
The effective date of the Taxpayers Relief Act of 1997 is May 7, 1997.
Prior to enactment of the Taxpayers Relief Act of 1997, gain on the sale of a primary residence was taxable unless it was reinvested in a new primary residence within two years of the sale of the old primary residence. Also, there was a once-in a lifetime capital gains exclusion of a maximum of $125K on the profit from the sale of a primary residence for homeowners aged 55 or more.
The Taxpayers Relief Act of 1997 repealed both of these provisions and as a replacement we got the Section 121 rules in effect today. Now, there is no requirement to reinvest sale profits in a new primary residence and the profit up to $250K per taxpayer is tax free, not just deferred. Additionally, the capital gains exclusion can be used repeatedly at 24 month intervals, not just once in a lifetime.
There is no reason not to file a joint tax return. There is no requirement that a married couple have two incomes to file jointly. The joint return simply allows a married couple to report all their household income on a single tax return, even if only one spouse had earned income.
If your spouse does not work, and you are filing in your name only, then you are denying yourself a higher allowed standard deduction and a higher personal exemption.