Don't Be Afraid To Pay Some Tax

Tax rates are as low as they have ever been and rates are going even lower in 2018 with the new tax law. Take advantage of these low rates, especially on the bottom of the scale.

Always be sure you have enough gross income to use up all your deductions. For an average family, the standard deduction is $24,000. If possible, you want to keep your income and your tax high enough to use up the child credit and the day care credit. These credits are mostly non-refundable and do not carry-forward.

Self-employed people have a great ability to control their taxable income: bonus depreciation; section 179 expense; timing itemized deductions; managing the invoicing and collection process; and prepaying expenses at year end. All these methods can be used to your advantage to target a certain income range. Roth IRAs or Roth conversions can also be used to shift income.

New businesses are a prime candidate for targeting income. They have too many expenses the first year. Don’t waste them!!! Try and break even the first year. The loss may offset other W-2 income, but you are wasting 15% SE tax the second year on the amount of the loss.