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January 20, 2015 at 5:48 AM #782182January 20, 2015 at 7:23 AM #782183AnonymousGuest
[quote=AN][quote=harvey][quote=AN]I’m convinced that it’s not worth it to be a rich […][/quote]
First world problem.[/quote]I’ve personally experienced 3rd world problems. Have you?[/quote]
No I have not. And I respect the fact that you have.
When I was a child, I was “poor” by American standards, but I know that I had it far better than the majority of people in the world. Just about every American does.
I was just poking fun of the tone of this thread. We sometimes lose perspective and say odd things.
Financially speaking, it’s always worth it to be rich.
[quote]$500k/year as a couple ain’t that rich.[/quote]
It’s rich enough that small changes in tax policy won’t be a hardship, or even a disincentive to earn more.
January 20, 2015 at 9:09 AM #782185anParticipant[quote=harvey]
I was just poking fun of the tone of this thread. We sometimes lose perspective and say odd things. [/quote]You’re right, a lot of times, people lose perspective. Especially when you compare yourself to the entire human race and not just your neighbor in America.[quote=harvey]Financially speaking, it’s always worth it to be rich.[/quote]Of course it is. But you’d only say that if you stop reading after 1/2 of my first sentence. I was making a comparative statement. If you want to be rich, you’re less vilified as a biz owner, especially when you’re talking about the tax code.
[quote=harvey]It’s rich enough that small changes in tax policy won’t be a hardship, or even a disincentive to earn more.[/quote]I never said it’s a hardship or disincentive.
January 20, 2015 at 9:18 AM #782186anParticipant[quote=SK in CV]If they use a home office exclusively for work and there is no other local office, then there might be a small deduction. If they use their cars for business, they can write off a piece of the cost, exactly like you can. They can write off their cell phones if they use it for work and it’s a 2nd cell phone (can’t write off 1st cell phones). Bottom line is, they can legally write off costs that are related to the business. Not unrelated costs that improve lifestyle outside of work.[/quote]W2 earner can’t write off any of that. I have a home office that I use for work. Can’t write that off. I have a car that I use to take myself to work and back. Can’t write that off. Biz owner can have the company pay for the car and maintain the car, so it’s not a piece of the cost, it’s the entire cost + maintenance. Biz owner can have their company own the cellphone contract. I don’t know about you but having your computer, cellphone, car, etc. paid for does improve their life style. Especially if it allow you to have extra money to spend on other stuff.
Let me put it another way. Lets say a W2 earner and a biz owner both making $200k (based on their taxable income). The W2 earner would have to pay for the stuff I listed and more with their after tax income. The biz owner can have a lot of those stuff paid for through their biz. So the $200k can be use purely for their enjoyment to enhance their life style.
BTW, I thought you said it’s fantasy and does not exist?
January 20, 2015 at 1:54 PM #782192AnonymousGuestThis is what SK said:
[quote]That fantasy world doesn’t exist. Business owners can’t write off a lavish life style legally.[/quote]
And it is for the most part true. Sure most can write off one car, maybe two, the cell phone bill and some office equipment, but the tax savings probably adds up to a few thousand dollars a year or so for most.
Of course there’s the “company meeting” in Hawaii and all of those sorts of gimmicks, but a tax deduction is still basically a discount. You don’t get the stuff for free.
So business owners get to buy a few things “on sale” – maybe 30% off or so depending on their tax bracket.
It’s a nice perk and some like to boast about it, but it’s hardly a lifestyle-changing benefit.
January 20, 2015 at 2:37 PM #782194anParticipant[quote=harvey]This is what SK said:
[quote]That fantasy world doesn’t exist. Business owners can’t write off a lavish life style legally.[/quote]
[/quote]
And this is the post he was responding to:[quote=SK in CV][quote=AN]The more I see these kind of stuff, the more I’m convinced that it’s not worth it to be a rich W2 earner. If you want to be rich, be a biz owner. There are a shit load of stuff you can write off or have the company pay for your life style. Then, you don’t need a big pay check to live just as lavish of a life style as those W2-er in the upper echelon.[/quote]
That fantasy world doesn’t exist. Business owners can’t write off a lavish life style legally.
It is hard to become super rich as a wage earner. But it isn’t hard to become super comfortable as a very high wage earner. Don’t live like you’re super rich, don’t spend it all and invest wisely. It doesn’t happen overnight.[/quote]Lavish is in the eye of the beholder. I’m sure when compare to other 3rd world countries, most American life style are pretty lavish. I consider having a cellphone, a luxury car, a nice house, new computers pretty lavish. Maybe because SK lives in CV, so his definition of lavish might be quite different than some of us lowly W2 earners who can’t afford to live in CV.
See the sentence I put in bold that SK seems to only read 1/2 of and responded to. If the company pays for your 7-series/S-class/Tesla/Range Rover, brand new computers, brand new iPhone w/ service, servicing your car, paying for your car insurance, home office, part of your utility, etc. Those can easily add up to tens of thousands of dollar. All these stuff I just listed are stuff I’d considered lavish. Not private plain lavish (maybe that’s what SK would consider lavish), but that just be the difference in definition of lavish.
Then there are stuff like SEP IRA that W2 working stiff don’t have access too. 25% or $52k/year in contribution, which ever is less. That’s a hug benefits IMHO. If both spouses work for the company and have the company put money into their SEP account. You’re talking about $104k/year. W2-er can only max out at $17.5k/year or $35k/year as a couple. I can go on and not, but you get my point. There are a shit load of knobs and lever that biz owner have access to to manipulate their income that W2 earners don’t have access to. Which is why I said what I said. If you want to be truly rich, be a biz owner.
January 20, 2015 at 4:49 PM #782205poorgradstudentParticipant[quote=AN][quote=SK in CV]If they use a home office exclusively for work and there is no other local office, then there might be a small deduction. If they use their cars for business, they can write off a piece of the cost, exactly like you can. They can write off their cell phones if they use it for work and it’s a 2nd cell phone (can’t write off 1st cell phones). Bottom line is, they can legally write off costs that are related to the business. Not unrelated costs that improve lifestyle outside of work.[/quote]W2 earner can’t write off any of that. I have a home office that I use for work. Can’t write that off. I have a car that I use to take myself to work and back. Can’t write that off. Biz owner can have the company pay for the car and maintain the car, so it’s not a piece of the cost, it’s the entire cost + maintenance. Biz owner can have their company own the cellphone contract. I don’t know about you but having your computer, cellphone, car, etc. paid for does improve their life style. Especially if it allow you to have extra money to spend on other stuff.
Let me put it another way. Lets say a W2 earner and a biz owner both making $200k (based on their taxable income). The W2 earner would have to pay for the stuff I listed and more with their after tax income. The biz owner can have a lot of those stuff paid for through their biz. So the $200k can be use purely for their enjoyment to enhance their life style.
BTW, I thought you said it’s fantasy and does not exist?[/quote]
The kind of tax write offs you’re talking about are potentially fraudulent. I know for a fact the rules on home offices are pretty strict if you want to follow the tax code to the letter. If not… well, then just make up a number you think is fair to pay the government and hope you don’t get audited.
January 20, 2015 at 5:10 PM #782207AnonymousGuest[quote]Lavish is in the eye of the beholder. [/quote]
So we are debating the definition of lavish?
You seem to be missing the point that tax deductible doesn’t mean free.
Bottom line is that a sole proprietor small business owner can maybe realize an extra 10% or so in net income through (legitimate) tax deductions.
The deductions are not what provides the lavishness – to support a lavish lifestyle one still has to have lavish earnings.
A nice perk, but it comes at the cost of a lot more risk and stress.
January 20, 2015 at 5:35 PM #782208anParticipantHarvey, here’s the definition of lavish, since you don’t know: http://www.merriam-webster.com/dictionary/lavish. You should also learn to read the entire post. Obviously bold and pointing out your ability to read isn’t helping.
January 20, 2015 at 5:39 PM #782209anParticipantPoorgradstudent, I’m talking about legal deduction, not fraudulent activities. As for home office, W2 Warner can’t deduct home office, so what’s your point?
January 20, 2015 at 5:43 PM #782210AnonymousGuestSo do we use the Webster’s definition or the “Lavish is in the eye of the beholder” definition?
I’m actually a business owner myself, so I think I’ll be heading to Vegas this weekend for a lavish weekend bender at Crazy Horse.
It won’t cost me a dime. I’ll just write it off.
January 20, 2015 at 6:13 PM #782211anParticipantYou know you have a strong argument when you start using straw man and hyperbole.
Since reading comprehension is so difficult, what’s your definition of abundance and excess? Are you saying sections have the same definition of abundance and excess?
January 20, 2015 at 6:25 PM #782213joecParticipantAN, I think the problem with some of the blanket comments you are making is that there is a cost for the business to do this. If a “company/corporation” is buying/expensing fancy cars for the owner/exec, it’s costing them money. If companies choose to waste their money this way, be my guess. Take the tax benefits, but it’s still coming out of their cost. It’s not free. It’s a deduction. If you look at how some old startups were ran, they weren’t wasting money like this (except during the .com boom)…Most companies save as much as they can and don’t spend on frivolous things.
For sole proprietorships, you are limited in that you CAN’T deduct driving into the office. No one can. YES, there is some benefit to leasing a car, but it HAS to be justified. If you say you need a car to get to work and code, if you get audited, driving to work is not considered a valid deduction.
Yes, I see people deduct all sorts of things, but again, anyone can make up anything and risk an audit with no defense.
In terms of computers, all that stuff, all companies need these to run. It’s a valid business cost. Can you operate without it?
All that said, I’ve made the bigger bucks in the past in hi-tech as a w-2 worker and yes, taxes suck, but I had it tons easier too. I got plenty of “free” trips and travel, toys from work, free internet, expenses, meals, fun events, you name it. I honestly miss it actually and DON’T do any of that now. The company paid for all those back then, but it was a cost to keep me working and honestly, to do the work.
It IS TRUE that businesses get better retirement options and can write stuff off, but they still have to be legitimate for the business. Like can I fly to New York and say it’s work? Probably not…unless there is some event there relevant to work. Companies get this too, they send people to conferences and write it off. Just be a shareholder and you’re now a business owner as well. Of like I said, quit your day job and start a business and see how you do. It’s not as easy as stated I feel.
I also know dual income massive income people making more than 500k and what I hear is (true spoken words out loud): “They have so much money, they don’t know what to do with it”.
I’m not really feeling “sorry” for people making 500k+ alone in just income…not even counting passive investments, retirement, etc…
If they can’t do “well” or “get ahead” in this world, then something is massively wrong.
All this said again, I highly doubt this will past since it’s a Republican congress.
January 20, 2015 at 6:29 PM #782214AnonymousGuestI’m not arguing any more. I’m ridiculing.
January 20, 2015 at 7:17 PM #782216utcsoxParticipantI think you also need to included the social security and medicare taxes into the calculation:
Compared to self-employees, employers paid 7.65% up to $118,500 and 1.45% of medicare tax after that.
So, let’s use the $500k income high salary w-2 employees as example, employer(s) will contribute about ~$21k pre-tax money on their behalf.
In addition, the two high w-2 employees will have health care benefits, let’s assume employer contribute $14,000 a year.
How about 401k matching? let’s say employer match dollar per dollar, and that is $17,500 pre-tax money.
That’s about ~50K of pre-tax benefit that self-employee who is making $500k need to deduct to get the same benefits as high w-2 people. If we assume tax rate of 40%, you need to find a way to deduct ~$125K a year to match that? Is this feasible? Sure. Is it likely? You guys tell me.
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