If you set the entity up correctly and work with a decent accountant, your $112k turns into more like $40k taxable, and if you are married, that $40k drops to $20k @ 10% + $20k @ 12% or ~ $4500 in taxes.
https://www.kingsfund.org.uk/projects/nhs-in-a-nutshell/how-...
As I understand it, NHS comes from general taxation.
Obviously there is no actual "fee" to use the NHS at the point of use - it is all free apart from prescriptions which are the same price regardless of what you get (and you might get it for free anyway depending on your circumstances)
Isn't that enough to fund the programs you are speaking of?
https://www.thebalance.com/current-u-s-federal-government-ta...
Some outliers are home office and utilities and things like that.
I'm freelancing currently myself, and available deductions are honestly miniscule and well-defined.
The IRS has rules (typically unenforced) regarding this. You are supposed to draw a salary that matches your job in your local area. So if you are based in Tinyton, Flyover State, you could probably get away with paying yourself $30k/yr, but in NYC (where I'm based), my accountant told me $70/hr is basically as low as I can safely go. So I do $70/hr and then $14/hr in my retirement account.
The $70 turns into ~$78 after all the employer taxes add into it, and I take home only $52 after employee side of taxes are taken out of it.
What's the risk - audit? And if so, what's the risk from the audit? A fine for tax fraud? Jail time?
It's actually a very interesting little booklet.
The broader point still remains, for a business (a 1099 is considered a sole-proprietorship) generally net income is taxed, and as a W2, your taxes are witheld per pay period.
Gross Income: $112k
- SEP IRA 25%: -$28k
- Owner Health Insurance: -$15k
- 199-A Deduction (20%): -$12k
Total business income for taxes: $47k
- Married Filing Jointly Deduction: -$24k
- Total taxable income: $23k
Tax on $23k (10% of first $20k, 12% of next $3k): $2360
Another gem many people don't know about is "Increasing Research Activities", for certain industries this essentially translates to 5-10% of your total payroll becoming a credit. That's huge.
WTF? Who pays $15k PER YEAR for health insurance? That's nuts. In most countries USD$15k would pay for healthcare for 2 or 3 people for their entire lives.
For a brief period I lived in Virginia and had no medical coverage through my employer. The legal minimum coverage was $1,400 / month for my family of four... and it was basically worthless; I would have had to have paid out something like $40k in a single year for medical services before I would have broken even.
So sure $15k is ridiculous to pay for health insurance, but in the US, its the cheap option for a family.
is more than they make in their entire lives.
Trying to compare US COL to "most countries"
And if you wanna only look at western countries that's obviously demonstrably false.
Whatever people pay as part of the healthcare tax is gonna come out to about $15K for someone who is making $100K in most EU countries.
And still none of that considers things like Simplified Employee Pension Plan (SEP), health insurance, home maintenance, etc, etc.
The list can go on and on depending on the type of your business, jurisdiction, and supporting documentation.
* Talk to someone about your local tax rules before taking action.
somewhat relevant reading on what can be done if you're well versed with tax laws: https://scottestill.com/buy-new-used-car-2018-get-100-tax-de...
Surprisingly, this dealer has an entire page dedicated to it this, and why you should buy one of their SUVs: https://www.landroverhuntvalley.com/business-tax-advantage.h...
I only pay my accountant around $2000 to handle a bunch of housekeeping at the end of the year that I'm to lazy to do during, and to file my taxes. For years I did my own taxes using Turbo Tax Self Employed and Turbo Tax Business Editions, but in 2016 I decided to outsource all of that headache, the first year, my taxes were half of what they were the year before with similar income. Then after the TCJA in 2017, my taxes were only 1/5th what they had been before the accountant, with close to double the raw income.
The biggest changes from doing it myself: I got an accountant; I incorporated (s-corp) instead of doing self-employment income; I draw W2 income now (using Gusto); I set up a SEP-IRA and put 20% of my W2 earnings as an automatic debit from my business account (in Vanguard); TCJA chops off 20% of my distributions on my K1; and I'll state again, I hired an accountant.
Almost every accountant out there will be better than an H&R Block or Turbo Tax.
I feel like I'm doing 90% of the work already, having organized all my expenses and income. What are they doing other than typing it into their own Turbo-Tax-equivalent?
“TurboTax will take what I did last year and minimize my taxes. My accountant will tell me what to do differently this year to minimize my taxes next year.”
In other words a good accountant is a forward-looking advisor, not just a calculator.
It’s pretty easy find an accountant but they might not be good and it’s hard to tell, especially in advance.