September 24, 2006 at 3:21 PM #7590mixxalotParticipant
I am working on a 3 year project that pays 200k per year salary.
My boss lives in Malibu and keeps telling me to buy a home in Ventura to beat the tax bite. What besides having one’s own business and a home can be used to beat the tax bite? I dont have 401k because I am not an employee but a consultant.
ScottSeptember 24, 2006 at 4:18 PM #36243carlislematthewParticipant
Research “Solo 401k”. Sometimes known as Self-employed 401k. In essence, you’re the manager of the plan and it can contain only you. The contribution limits are VERY BIG (up to around 40K I think, depending on your income). I researched when I was a consultant but I never followed through as I went back into full time employment.
Check out http://www.401kbrokers.com – they have a very decent FAQ.
You say “besides having one’s own business”, but if you’re self employed you *DO* have your own business. It doesn’t have to have a special name or anything… So, deduct your rent, portion of bills, capital expenditures (laptop!), etc.
Needless to say, I’m not your accountant, so please go and get professional advice. It will save you a ton of money.September 24, 2006 at 5:18 PM #36244powaysellerParticipant
Good advice from carlislematthew. Get an accountant to help you out. I can give you the name of a guy in San Diego, but perhaps you prefer meeting with someone face to face in your area.September 24, 2006 at 9:14 PM #36269SD RealtorParticipant
Don’t forget profit sharing as well. As a small business owner I researched the difference between a defined benefits plan verses a 401k and profit sharing. You actually can do better with a defined benefits program but there are some potential risks due to the obligatory contributions. Anyways at least for my a 401k plus a profit sharing plan worked out best. I spoke with Rob Butterfield (part of the braintrust from Ray Lucia’s show)about it, he was quite helpful.September 24, 2006 at 9:20 PM #36270sdduuuudeParticipant
Rent a nice place and have the business rent all or part the place you live as a place of business. This will give you a deduction that isn’t much smaller than the interest deduction you would get for owning.
If you do this already – you won’t gain that much by buying.
I’m no accountant so consult your own for details.September 24, 2006 at 9:36 PM #36272privatebankerParticipant
Here’s the bottom line, you need to meet with a CPA that will give you objective tax advice. Look for one that does not provide investments (major conflict of interest). There are many tax strategies that you can utilize, you just need to be directed by a knowledgeable tax advisor. Like I’ve always said, this is the last place to receive any financial advice.September 24, 2006 at 9:56 PM #36274lindismithParticipant
I am also shopping for a new tax advisor. My current firm is in Sacramento, and while they’ve done a good job in the past, my business needs someone closer.
If anyone would like to make some recommendations, please post them here, or email me at [email protected]
Emails will most likely go to my junk mail, so please put “Piggington” or something similar in the subject line.
Belinda.September 24, 2006 at 10:12 PM #36276September 24, 2006 at 10:12 PM #36277September 25, 2006 at 2:51 AM #36284powaysellerParticipant
Michael Gallon, CPA, 619-440-4780.September 25, 2006 at 9:21 PM #36423mixxalotParticipant
Thanks for the great advice! I am in Ventura/Oxnard area and prices are way too overpriced here. Heck at least San Diego was a nice area! Oxnard is a shithole and only reason I live here and rent a room is to save money on the project.
I sent my boss the link on 401k plans and will work with him to set it up for employee/consultants. As for the home office deduction, I can use that per advice from my CPA in San Diego and since I keep a residence for time being still in San Diego I get a good break on taxes up to 1 year using per diem rates.
-ScottSeptember 25, 2006 at 9:41 PM #36424anxvarietyParticipant
privatebankers advice is great.
I’ve heard that home office deductions are the most audited of all tax returns at almost twice the standard audit rate, most specifically flagged is writing off space used. I may not have the facts correct, but it’s something to look into or ask CPA about – since a few here are saying to write everything in the rental off..September 26, 2006 at 5:07 AM #36448ctlmdjbParticipant
I rent a place and use the room overthe garage as an office. As this is a seperate space that COULD be used as living quarters that is acceptable for a tax deduction. Once you itemize tax deductions you should make sure that you claim everything possible:
– Percentage of rent
– Percentage of gas and electricity
– Percentage of waste removal
– Percentage of water
– Also keep a record of mileage in your car used for business purposes (trips to airport, clients) – that is deductable at $0.45 / mile or so.
Finally expenditure you make for the business (I bought a portable air conditioner this summer for example for the office).
I have also heard that the chances of audit are high, so keep it all clean and use CPA!September 26, 2006 at 9:09 AM #36472technovelistParticipant
Incorporate your consulting practice. Then you can have your own profit sharing plan that you run yourself. It’s more flexible than most other possibilities.
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