I'm no expert, but this is weak sauce. If these are the biggest "loopholes" to be found in a tax bill that doesn't just change rates but makes major conceptual changes like switching to a territorial tax system, and which seems to have gone from nowhere to law in like a month, the Republicans in Congress must be geniuses. I think the 1986 tax reform bill took over a year to hammer out, and still had plenty of "bugs".
It's more likely that this article doesn't even scratch the surface of the weird incentives. (And, for that matter, that many of the proposals in the article wouldn't work)
What I want to know is, are companies like Apple with billions of "cash" overseas scrambling to buy foreign real estate or other illiquid assets before the end of the year to get the lower deemed repatriation rate?
So their advice is to incorporate myself in order to deduct all my local and state taxes? So I can pay 15-35% federal corporate income tax rates, plus 5-10% in state corporate income tax rates, then my state income tax rates, then finally 15-20% in federal dividend rates?
Methinks someone didn't think their article through.
you don't pay corporate taxes with a pass through LLC. You deduct your expenses from your income, and the rest gets passed through the LLC to you as personal income. So you're getting taxed on less because you can essentially write off any expense that you can justify as being spent on the corporation itself.
The downside is, usually, that you get taxed on ALL profits personally no matter how much you actually withdraw from the LLC but if you are the only member and you're just using it for tax purposes that's less of an issue since you intend to take all the money anyway.
Disclaimer, I am not a tax professional, and I do not actually do the taxes/distributions for the LLC I part won. This is just how it was explained to me by the person who actually does those taxes.
If you've been contracting, driving uber, etc hopefully you've realized this has been advantageous before. You get to deduct expenses without as many limitations.
However what struck me more is how high earners would immensely benefit from the tax plan. So let's say you are CVP in big company and making $2M. At least half of these will probably in stocks and you would be paying 15% tax - so no problem there. However your cash still gets taxed at 35% or more. Now what you can do is become corporation, get your paycheck only get taxed to 21% and pay yourself living expenses. So basically you just keep your money in your "corporation" invest it, grow it - all for just 21%. You can then pass this whole thing off to your kids, again completely untaxed! In essence, people making $1M or more got about 20% tax break while most middle class people are probably getting 5 to 10% or so.
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[ 5.6 ms ] story [ 28.9 ms ] threadIt's more likely that this article doesn't even scratch the surface of the weird incentives. (And, for that matter, that many of the proposals in the article wouldn't work)
What I want to know is, are companies like Apple with billions of "cash" overseas scrambling to buy foreign real estate or other illiquid assets before the end of the year to get the lower deemed repatriation rate?
Agreed. I thought about what a good source for similar info would be, I guessed reddit, and I was right:
https://www.reddit.com/r/personalfinance/comments/7l3b6r/us_...
(/r/personalfinance megathread)
Methinks someone didn't think their article through.
The downside is, usually, that you get taxed on ALL profits personally no matter how much you actually withdraw from the LLC but if you are the only member and you're just using it for tax purposes that's less of an issue since you intend to take all the money anyway.
Disclaimer, I am not a tax professional, and I do not actually do the taxes/distributions for the LLC I part won. This is just how it was explained to me by the person who actually does those taxes.
If you've been contracting, driving uber, etc hopefully you've realized this has been advantageous before. You get to deduct expenses without as many limitations.
- Have your kids right away
- Get lucky with the timing of your inheritance
- Move to New Hampshire
- try to earn more this year
- Upgrade your private jet
So mostly not usefull at all...
However what struck me more is how high earners would immensely benefit from the tax plan. So let's say you are CVP in big company and making $2M. At least half of these will probably in stocks and you would be paying 15% tax - so no problem there. However your cash still gets taxed at 35% or more. Now what you can do is become corporation, get your paycheck only get taxed to 21% and pay yourself living expenses. So basically you just keep your money in your "corporation" invest it, grow it - all for just 21%. You can then pass this whole thing off to your kids, again completely untaxed! In essence, people making $1M or more got about 20% tax break while most middle class people are probably getting 5 to 10% or so.
When you figure out how much more health care will be middle class folks will lose out. Just as the Republicans planned.