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Post 18 May 2021, 6:49 am

rickyp wrote:Geo is this federal tax only or state and federal?


Federal only! Total Federal tax divided by Adjusted Gross Income. That excludes Social Security and Medicare taxes as well.
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Post 18 May 2021, 8:33 am

Its been a dozen years since I filed my own taxes. My accountant retired and I had to do my own personal taxes this year. It was so easy, all online now and most of the information is already filled in from tax records... Took 20 minutes and I type slow. Techonology!

My personal tax (Federal and Provincial) worked out at 17.8%
My business paid an effective level of 7.8% .(Plus 13% HST that was collected with each invoice)Harmonized Sales Tax.
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Post 18 May 2021, 9:36 am

rickyp wrote:Its been a dozen years since I filed my own taxes. My accountant retired and I had to do my own personal taxes this year. It was so easy, all online now and most of the information is already filled in from tax records... Took 20 minutes and I type slow. Techonology!

My personal tax (Federal and Provincial) worked out at 17.8%
My business paid an effective level of 7.8% .(Plus 13% HST that was collected with each invoice)Harmonized Sales Tax.


That sounds great. If I add in state and local income taxes, I'm up to 21.8%, but I live in a high tax city in a high tax state, so it's not really comparable.

My business, however, pays zero percent. Taxes are based on profit, and if you make your business have no profit, it pays no taxes. In my case, all profit gets paid out as wage before end of year, so no Federal taxes. There is a small tax that NYS/NYC requires based on revenues, but it's not much.

All that said, if you're getting health care in that total, I say you've got a really good deal.
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Post 18 May 2021, 1:31 pm

Mines a pass thru business as well, and normally I aim for zero. But then I might push myself up a bracket or two for personal tax. I lowered my personal with large personal pension contributions RRSP which are tax sheltered. I think they are like 4K in the US.

Yes, health care too. Well, not dental. And a small co-pay for prescriptions.
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Post 19 May 2021, 5:04 am

Geo:
My business, however, pays zero percent. Taxes are based on profit, and if you make your business have no profit, it pays no taxes. In my case, all profit gets paid out as wage before end of year, so no Federal taxes.


Every situation is different, and assuming that your business is a pass through entity (sole proprietorship, partnership, etc.), wouldn't it be better to not pay the income out as salary so that you can enjoy the 20% pass through income reduction (courtesy of the name of this topic).

Feel free to DM me if you don't want a public conversation on this.
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Post 19 May 2021, 6:21 am

Ray Jay wrote:Geo:
My business, however, pays zero percent. Taxes are based on profit, and if you make your business have no profit, it pays no taxes. In my case, all profit gets paid out as wage before end of year, so no Federal taxes.


Every situation is different, and assuming that your business is a pass through entity (sole proprietorship, partnership, etc.), wouldn't it be better to not pay the income out as salary so that you can enjoy the 20% pass through income reduction (courtesy of the name of this topic).

Feel free to DM me if you don't want a public conversation on this.


I never switched to a S-corp, still a C-corp. That's something I know I should do.