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Old 02-07-2014, 05:06 PM   #61
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While the OP explicitly indicated that self-employment was not an option, I want to throw this in for other readers:

I am self employed and was disappointed when I found out that all of the alleged amazing self employment tax deductions you hear about are myths. Like other posters, I found the home office deduction was so small as to be almost meaningless (I use 600 SF of a 3200 SF house exclusively as my only office and it is so small as to be almost not worth the trouble of calculating).

However, I finally found the holy grail, which you never hear discussed. I started a pension plan. This cut my taxes in half (literally in half, not figuratively in half). Of course, the taxes are only postponed, not eliminated, but still. The other problem is you have to be willing to save half your income. Should be easy when you are making north of 200K. I found it was.

This does not help the W-2 crowd, but merely makes them madder, as it should. Why should I be able to put 50% of my income into a tax sheltered plan and you can't? The tax code is stupid.

When my wife and I were both high income W-2 slaves, I tried to convince her we should divorce (on paper). It would have saved us a significant sum of money. She wanted no part of it. I still think it is a great idea for situations where husband and wife are both high income earners. As far as I am concerned, the government should not have any input into marriage anyway. I got married by a preacher, not a government bureaucrat.
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Old 02-07-2014, 05:14 PM   #62
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However, I finally found the holy grail, which you never hear discussed. I started a pension plan.
I just read the link posted by the OP regarding the individual who pays no income taxes on 250k/year income and note that this person also uses the pension plan as the primary tax reducer.
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Old 02-07-2014, 05:17 PM   #63
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I don't think anyone here who has suggested a small business has suggested a sham business or deductions. I am sure many here have expertise that could earn consulting income or have the skills to develop a knowledge worker side business using brains and a lap top, and then many expenses do become legitimately deductible, like health insurance or attending a business related conference in London or Paris.

I have a feeling that OP and spouse are busy enough earning their handsome W2 incomes that seriously getting involved in a consulting or other side business isn't something they're looking to do...........
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Old 02-07-2014, 05:27 PM   #64
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I have a feeling that OP and spouse are busy enough earning their handsome W2 incomes that seriously getting involved in a consulting or other side business isn't something they're looking to do...........
To each his own. From other forums, I know many people with day jobs and side businesses. A couple of side businesses are what helped DH eventually leave the megacorp world behind.

Perhaps the OP could make more money for less work doing consulting or owning a small business.
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Old 02-07-2014, 05:49 PM   #65
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I just read the link posted by the OP regarding the individual who pays no income taxes on 250k/year income and note that this person also uses the pension plan as the primary tax reducer.
Look up Solo 401K for starters......I opened one and it allows me to shelter $17,500 + $5,500 + 20% of the net earnings of my business.
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Old 02-07-2014, 06:34 PM   #66
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Those of you saying be happy you are paying high taxes because you have a high income should remember that a lot of these high incomes (not all of course) come with high hours and stress which could actually mean a shorter working life. It can't be healthy to work 60 or 70 hours a week, but if you do, it certainly seems unfair to be taxed so heavily.
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Old 02-07-2014, 10:59 PM   #67
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I have been trying to hold back, but can't. You make more in a year than most people will ever be worth. ....
Rustward, all of what you write is true, but.... it is nonetheless frustrating to pay in taxes more than most people gross.

Most people have no appreciation for the hours and stresses associated with high income jobs. Many high income jobs are long hours and you are "on call" 24/7/365. And in most cases, there is NO job security - you can be cut loose at any time for no reason - if the new boss arrives and doesn't like the way you part your hair - you're gone.
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Old 02-07-2014, 11:23 PM   #68
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Rustward, all of what you write is true, but.... it is nonetheless frustrating to pay in taxes more than most people gross.

Most people have no appreciation for the hours and stresses associated with high income jobs. Many high income jobs are long hours and you are "on call" 24/7/365. And in most cases, there is NO job security - you can be cut loose at any time for no reason - if the new boss arrives and doesn't like the way you part your hair - you're gone.
These things are also true for jobs that don't pay nearly as much as the OP's household earns. Only certain people in education and unions have any job security regardless of their income, and being on call is also a given for many people who make much less (the first things they get on the job are a company phone and lap top, so they are always communicating with the office, clients, bosses, etc.).
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Old 02-08-2014, 01:20 AM   #69
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Rustward, all of what you write is true, but.... it is nonetheless frustrating to pay in taxes more than most people gross.

Most people have no appreciation for the hours and stresses associated with high income jobs. Many high income jobs are long hours and you are "on call" 24/7/365. And in most cases, there is NO job security - you can be cut loose at any time for no reason - if the new boss arrives and doesn't like the way you part your hair - you're gone.
Been there. Long hours, on call 24x7, no job security, cut with no reason. All of that. I understand. Been there. WTF

Perhaps if the OP would tell us his situation things would be more clear.

Is somebody holding a gun to the OP's head to make him do this?
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Old 02-08-2014, 08:46 AM   #70
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Been there. Long hours, on call 24x7, no job security, cut with no reason. All of that. I understand. Been there. WTF

Perhaps if the OP would tell us his situation things would be more clear.

Is somebody holding a gun to the OP's head to make him do this?
Up to the OP of course, but I see no reason for him to feel a need to 'justify' his income.

He might have been able to find a cushy high paying job - if so, good for him! There are cushy high and low paying jobs, and grueling high and low paying jobs, all with varying degrees of job security. Any of those workers are equally entitled to seek out legal ways to reduce their taxes.

I don't see any reason to drift into 'judgmental' territory.

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Dual W-2 earners - how to stop getting hosed on taxes?
Old 02-08-2014, 08:59 AM   #71
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Dual W-2 earners - how to stop getting hosed on taxes?

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Up to the OP of course, but I see no reason for him to feel a need to 'justify' his income.



He might have been able to find a cushy high paying job - if so, good for him! There are cushy high and low paying jobs, and grueling high and low paying jobs, all with varying degrees of job security. Any of those workers are equally entitled to seek out legal ways to reduce their taxes.



I don't see any reason to drift into 'judgmental' territory.



-ERD50

Good answer ERD50. I agree with you 100%.
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Old 02-08-2014, 09:26 AM   #72
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Not bitching about my job (in this thread, anyway), just the lack of tax deductions for W-2 earners as compared to self-employed or the uber-wealthy.

But I will say that becoming high-earners didn't just magically happen, we both invested in professional masters degrees which had years of zero income plus student loans. We're early 30s.
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Old 02-08-2014, 09:38 AM   #73
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Yeah, some of the most stressful jobs are also pretty low-paying.

My brother is a GM at a fast food restaurant. He makes less than half what I make and probably works twice as hard.


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These things are also true for jobs that don't pay nearly as much as the OP's household earns. Only certain people in education and unions have any job security regardless of their income, and being on call is also a given for many people who make much less (the first things they get on the job are a company phone and lap top, so they are always communicating with the office, clients, bosses, etc.).
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Old 02-08-2014, 09:43 AM   #74
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This varies widely. My father has a wealthy friend who is gaming the system amazingly well. He is a snowbird, running a seasonal business in a northern state, and living in Florida in the winter.

So he lists his state of residence as Florida, and then treats all of his expenses during the rest of the year as business travel expenses.

I'm not sure if that is entirely legal. My feeling is it shouldn't be.


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I am self employed and was disappointed when I found out that all of the alleged amazing self employment tax deductions you hear about are myths. Like other posters, I found the home office deduction was so small as to be almost meaningless (I use 600 SF of a 3200 SF house exclusively as my only office and it is so small as to be almost not worth the trouble of calculating).
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Old 02-08-2014, 10:11 AM   #75
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Up to the OP of course, but I see no reason for him to feel a need to 'justify' his income.

He might have been able to find a cushy high paying job - if so, good for him! There are cushy high and low paying jobs, and grueling high and low paying jobs, all with varying degrees of job security. Any of those workers are equally entitled to seek out legal ways to reduce their taxes.

I don't see any reason to drift into 'judgmental' territory.

-ERD50
No judgement. I was responding to pb4uski, whose post seemed to be gratuitous. Especially this:
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Most people have no appreciation for the hours and stresses associated with high income jobs.
What does this have to do with income taxes? Hours and stresses?
Who are "most people"?
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Old 02-08-2014, 03:30 PM   #76
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The conversation is breaking down along the usual tribal lines, here. I don't believe that anyone is condemning or in favor of punishing the OP for having a high income. My DH worked half a year last year and substantially out-earned the couple. Like the OP and his wife, we spent a lot of years under the wing of the University of California (in our case) and like them we view our taxes as paying back what we owe. We're lucky that we've avoided the judicial system, disability programs, and many of the other governmental programs that we also pay for, but they are there for us if we need them.

The very, very wealthy and the very, very poor pay a smaller portion of their income in taxes. Those of us in between pay roughly the same total percentage. I don't begrudge the very, very poor. My late in-laws suffered from psychiatric disease and DH was hospitalized on the state's dime a ciuple of times and probably received food stamps. While it would have saved the state some short term tax expense to let the little taker see if he could make it on his own, in the long run the investment paid off handsomely.

People who are interested in pondering the tribal divide might enjoy "Albion's Seed". Red was red and blue was blue long before there were states. My ancestors, having survived the first winter, promptly passed tax laws for the purpose of supporting mandatory public education.

The answer to the OP is "become a hedge fund manager".
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Old 02-08-2014, 04:11 PM   #77
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It has only been a short period of time where it was legal for me to marry my partner in California. I had always thought that the benefits of marriage were worth fighting for, and I'm pleased that we have the right to do so now.

However, since both of us still earn a high income, it has become clear that the marriage penalty associated with both individuals earning a lot is quite significant. As a single person, I can earn $183K and stay within the 28% tax bracket. If we get married, our combined income can only be $223K before we bump up above the 28% bracket. The penalty is quite high for two high income earners.

I'm not suggesting the OP, or anyone in this situation, should consider getting divorced to fix this. There are many benefits that we do not get for not being married. But the penalty seems a bit random to me. Why should two single people be able to earn so much more money than two married people before jumping up to the next tax bracket?

In any case, if my total tax bill in prior years was only $77K, I would have been thrilled. California adds so much extra tax burden compared to income free states like Texas. I would consider the OP to be quite fortunate to have so much income and only $77K in taxes.
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Old 02-08-2014, 04:42 PM   #78
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It has only been a short period of time where it was legal for me to marry my partner in California. I had always thought that the benefits of marriage were worth fighting for, and I'm pleased that we have the right to do so now.

However, since both of us still earn a high income, it has become clear that the marriage penalty associated with both individuals earning a lot is quite significant. As a single person, I can earn $183K and stay within the 28% tax bracket. If we get married, our combined income can only be $223K before we bump up above the 28% bracket. The penalty is quite high for two high income earners.
Congratulations! And welcome to the marriage penalty.........

The penalty impacts us even in retirement. And it will be worse when RMD's start.
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Old 02-08-2014, 06:55 PM   #79
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We're in the mid 200s and I think paid about 22%. My DW often is troubled by the same concern, and I try to tell her, she could take a job for the same hours and less vacation for half the salary and we could cut our taxes precipitously.
But I don't think she would like the result, other than the lower taxes.
I never had a clue we would wind up in this lucky position, so while I don't like paying taxes, it seems a reasonable rate, compared to those in the 50's-70's in particular. It helps that we usually get money back at taxtime; while idiotic, that seems to soften the blow a little. Paying another 500 in April, however, would rub salt in the wounds (I know, I know, the 1k we got back last year could have earning money in the market).
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Old 02-08-2014, 07:41 PM   #80
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The thread title and a number of posters have suggested that marriage, with both spouses working, is a real tax problem.

I tried a few simple examples in TurboTax's "Tax Caster". https://turbotax.intuit.com/tax-tool...ors/taxcaster/

If I assume equal earnings, the married couple does pay more tax than two singles. OTOH, for sufficiently unequal earnings, the couple pays less - there is a "marriage reward" for these people.

The additional tax in the first case seems to be around 2% of gross income. Certainly, that's a lot of dollars for high income people. But, would I really consider a divorce just to avoid 2%?

(A note on TaxCaster: It picked up the new medicare tax for the my couple situation - 0.9% on gross income over $250,000. But, it didn't give me the new tax I was expecting for my single person making over $200,000. Anybody know what's going on?)
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