How do you NOT get fucked in the ass by taxes? (Those making >$500,000 a year)
Im Canadian, and I am sick and fucking tired of losing close to half my income on taxes. I know that there are a lot of similarities between the Canadian and American system, so I think Americans are in the same boat.
Since I do not have a regular job, taxes arent automatically taken out of my paycheck. That means that I need to do taxes myself, and it also means that I need to keep track of every single freaking purchase and its receipt or else I cannot claim them as deductables, and I have to pay taxes on these purchases.
Everyone told me I need to setup a corporation or else I am going to get owned on taxes. So I set one up, and honestly I do not see how setting up a corporation saves you much on taxes (if at all). First you have to pay your 22% or so corporate tax, and then when you want to actually use your money for yourself (instead of it sitting in a corporate bank account) you need to give yourself a salary – and then pay tax on that again. So realistically, there is a damn good chance youll actually be paying more on taxes with a corporation. See some math below.
Say you make $500,000 a year – and you designate a salary of $200,000 for yourself. So you pay 22% corporate tax on $300,000 ($66,000) and an additional $65,565 on your salary personal income tax, for a total of $131,565. But of course, that $300,000 still in your corporate bank account is not YOUR money yet – so in the future, if you want to buy a house or a car or something with that money, you need to give it to yourself first (that means you pay income tax) and then you can spend it. Someone please tell me how having a corporation saves you any money? Unless you plan on making nothing for a few years, you can give yourself a salary of $30,000 or something and not pay any income tax (or very little).. but if you continue making money, youre gonna get fucked with a high tax rate on your ‘income’ withdrawal from your corporation. Say I stop working and bring in no money, and the next year I give myself $200,000 and the year later $100,000 – that means I pay another $65,565 and $27,261 – for a total of $224,391. Instead, if I didnt have a corporation, and paid income tax on that $500k, Id pay only $182,565 in income tax.
So what do you guys do?
Even if you setup an offshore corporation – the same problem occurs.. that money is not your money yet (its your businesses) and therefore you cant spend it on your house, groceries, etc until you give yourself a salary and pay income tax on that.
Am I missing something?
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