Tax advice

The easiest deferral is to fund a retirement plan, either by participation in a company sponsored plan or by funding your own IRAs. A company sponsored 401K would give you the greatest deferral of income.

 

Depends on your employer offering a 401(k) plan and being able to use per diem deductions. If they do, you can stick up to $17,500 a year in the 401(k) plan, plus gain whatever the company match is. If you are over 50 years old, you can stick an extra $5500 a year into the 401(k). Without that 401(k) contribution maxed out, your Fed tax bill would be $7,286 instead of $3,919. Once you hit retirement , chances are that your tax rate on your withdrawals then will be lower.

Example:
Earnings $70,000
Minus: 401(k) contribution: $17,500
Minus: 401(k) for over 50yo : $ 5,500
Minus: Per diem for 300 days: $14,160 ($59 x 80% x 300 days)
Minus: personal exemption: $ 3,800
-Can't take standard single tax deduction-
Minus: personal work expenses: ($ xxx) (work related out of pocket expenses, laptop, GPS, etc)
Taxable fed earnings: $29,040 minus personal work expenses
Fed tax due on $29,040: $3,919
OR, if you aren't yet 50 years old, your tax due would be $4,744 instead of $7,286. (you wouldn't get to stick the extra $5,500 into your 401(k) plan). With the max 401(k) contribution for the year, and lower taxes, you would still have $43,000 (or $47,756 if under 50) to live on.

There is also the state tax question. If your state tax residency is in a high tax state and/or city, that could be another $1000-$3000 slipping out of your fingers, compared to having tax residency in a no income tax state.

(Edited because I screwed up the standard deduction vs itemized deductions using per diem)

 

As a highly educated, trained,& skilled taxman.you hit the nail on the head...My only question to you now would be,how does one who's location is Mexico would know this ? ..Or have you just confused LA with being mexico..as far as I can tell ...not much difference..

 

Not sure what my current location has to do with knowing about taxes or how to cut them. California state taxes and LA traffic are why I left there long ago. In my example above, if you chose to live in California, they would also want about $1200 of your money.

The working world has changed. Outside of government work, very few pensions now, but a lot of 401(k)'s offered. Too many people won't even take advantage of a 401(k) deduction at just 6% and miss getting a free 2% or 3% raise from most companys' match. Or they hop jobs before they're eligible to get into the 401(k). Or they don't want to take the time to understand them, or IRA's as an alternative.

 

In addition to what Lobo wrote i am pretty sure u can still put 5000$ in a regular IRA on top of the 17500$ in a 401k.... so your first 22500$ is tax deferred.

 

If you don't have the 401(k) option yet, you can still put $5500 into an IRA this year and avoid the income taxes on that money. Use your savings to fund it, or $250 a week (or less if you choose to) until the end of the year will get you there. Whatever you put into the IRA now is not taxable income until you take any of it out, sometime after age 59 1/2.

Receipts for work related expenses can be itemized as deductions and you don't pay income tax on the money used to pay them.

Read through the "Truckers Taxes" section under Owner Operators for info too.

 

The Blue on goes on that one, The Red On the other. The big cable goes here. Paper Work goes to a CPA.