Moana Surfrider Hotel, Oahu, Hawaii
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It’s that time of year again, when households across the land are excited to fill out their tax forms. Yeah for Tax Day!
Goal #1 is of course to minimize tax burden using the numerous options available. Be sure to contribute to those deductible IRAs and 401ks!
Some households will have a zero or even negative tax burden, but most will have a tax obligation for the year. This is usually paid at least in part through paycheck withholding or estimated tax payments.
This is also the case for us since we pay Self-Employment tax on blog income. (But… plans are in motion to reduce/eliminate this.)
And I don’t know about you, but if I have to pay some taxes…. I at least better get a ridiculously cheap☆ trip to Hawaii out of the deal.
(I was feeling a little frisky today, so this one is fun….)
Several years ago I wrote a post with a rather obnoxious title, Never Pay Taxes Again, in which I outline our strategy to minimize our tax burden in the years to come. It is still one of the most popular posts on this rather obnoxious blog.
Then I recently outlined how we’ve paid no income tax for 4 years while increasing Roth accounts from $0 to $100k and raising basis in our stock portfolio by $145k. Not only was this all tax free, but will be tax free forever.
As you might expect, quite a few people have taken time out of their busy schedules to express their opinion about the taxes of a guy who writes stuff on a blog. There is something truly magical about the Internet that encourages this kind of sharing.
The strongest opinions seem to come in 3 main forms:
The end of 2016 marks the completion of 4 full years of choosing leisure over labor.
It’s been a fun ride so far… we’ve seen a large swathe of the world, birthed a baby, and experienced 5 or 6 minutes of fame.
But how effective have these 4 years been in terms of implementing our tax minimization strategies? Are Roth IRA Conversions and Capital Gain Harvesting just fantasies we keep while working, or do they actually produce results in the real world?
Let’s do a financial check-up and see how we are doing.
… and Taxes
Every year, Americans pay millions of dollars in extra tax. Because they are concerned about or fearful of an audit, they decline to claim deductions they are fully and legally entitled to. This is the Fear Tax.
Because I write a lot about our own tax minimization efforts… (Yeah… sorry about that :/ ) I get more than my fair share of commentary in this regard:
“The IRS is coming for you, man!”
“OMG!!! You are going to get audited!!!! Ahhhhhh……!!!!!”
It’s totally worth it though, because I’ve learned a great deal and saved big dollars as a result. But also because these conversations often lead to great discussions about tax law, ethics, fairness, government accountability, and civic responsibility.
Maybe we can have another one of those helpful discussions…? This time, about the Fear Tax.
A Fully Depreciated Asset (photo credit)
Bloggers, digital nomads, side hustlers, and business owners have more opportunities for tax savings than the average employee. One of my favorites is the ability to turn stuff you already have or were going to buy anyway into beautiful tax deductions through depreciation.
Have an extra room in your house? Write it off. That computer you once used for Facebook but now use to write blog posts and manage investments? Write it off. The smartphone you use to populate your Instagram feed? Write it off. The new SLR camera and lenses you plan to use to share details of the nomadic lifestyle? Write ’em off!
There is nothing better than having Uncle Sam help pay for the stuff you need for your business.
Naturally this ability to write it all off is a superpower that is rife for abuse, so the IRS has a whole mess of rules to follow. But as with all rules, there are always ways to optimize to your advantage. In this post I walk through the opportunities, gotchas, and strategies for depreciation write-offs using some common side hustle tools and equipment.
Have you seen my stapler? (photo credit)
After visiting 16 countries in 16 months we are back in Taipei, Taiwan for the next year or so. A rental property we stayed in awhile back was available once again and the landlord was happy to have us move back in. It always pays to be a good tenant.
Even better news, this apartment has a room we used only for storage. So I turned it into a tax deduction.. err, I mean a home office.