Forum Moderators: LifeinAsia
However, at the end of the year, that money would be taxed at 30% minimum federal tax (US) plus a self employment tax of 15% (sole proprietor). So basically about 45% of the 30k would have to go back in taxes making the sale NOT worth it.
Is there any other way to do the sale for some tax advantages in the US?
For those of you that are self-employed, doesnt that 15% self employment (pays for Social Security and Medicare) tax on top of realy suck!
Any suggestions or ideas (just mostly ranting here)...
The 30% federal tax is not an exact number but I know even before the sell that other income I will make will push SOME of my income into those higher brackets. In others words I know ALL of my income would not be taxed at 28% (but all income OVER a certain amount is).
the first $7,000 of income is taxed at 10 percent; dollars $7,001 through $28,400 are taxed at 15 percent; dollars $28,401 through $68,800 are taxed at 25 percent; and dollars $68,801 through $143,500 are taxed at 28 percent.
So the point I was trying to make is this. Let say I made the sale at the end of the year and I had already (before the sale) made 70k. The additional 35K from the sale WOULD be taxed at 28% PLUS about %15 self employment tax (although you only pay SE tax up to a certain limit around 82K or so)for a total of about 43% tax.
I am no tax expert and I will be talking to someone but that's the way I see it...
> I know for a fact that I have to pay "about" 15% of income to self-employment tax
I feel your pain.
Capital Gain (or loss). A category of gain or loss under the tax law resulting from the sale or other disposition of specified property such as stock or bond investments, real estate, etc. It does not include property used in a trade or business. However, special rules apply in such situations that can result in similar treatment for business property.
Don't know if this applies to you or not - see your accountant :)
To bad we don't have an accountant on these forums (willing to give a few pointers) :)
Yeah....so why haven't you incorporated exactly?
The sale could be seen as a capital gain.....you would need a CPA to rubber stamp this IMHO.
However, if you incorporated the gain could most definately be seen as a distribution and therefore save you most of the SE tax. You could also roll the sale into the future, or an IRA, and not pay a penny.
A good CPA should pay for themselves several times over.....and are therefore are not a real expense at all.
While lots of routine accounting stuff doesn't require expensive input, the proper structure of a business and a major asset sale are a couple of areas where good legal & accounting advice will more than pay for themselves.
