Posted by Financial Samurai 63 Comments. The maximum amount of earnings subject to the 6. And the great irony is, good luck trying to collect unemployment benefits if your business goes bust.

Having to pay 7. What types of income are not subject to payroll taxes? Below is a look at my passive income streams to give an idea of how much of that income is payroll tax free income. High-rate taxpayers will typically pay the healthcare surtax as well, for an all-in rate of Meanwhile, there are no federal taxes due on income produced by municipal bonds.

Yes, they kept the payroll tax income limit flat from tobut a 7. Because the government is always going after income, wealth is much more important for financial freedom. The more you work, the more you have to pay in taxes. From now on, really think about how all your income sources are taxed. Do you really want to work all day for the privilege of paying federal income tax, state income tax, city income tax, Social Security tax, Medicare tax, and so forth?

Just like inflation, tax increases will never end. Readers, are you excited to pay more FICA taxes for ? What are some of the steps you are taking to reduce your tax liability? Have you decided to apply for a government job yet to take advantage of rising taxes? Sam started Financial Samurai in during the depths of the financial crisis as a way to make sense of all the chaos.

After 13 years of working in finance, Sam decided to retire in to utilize everything he learned in the business to help people achieve financial freedom sooner, rather than later.

Sam is a big advocate of using free financial tools like Personal Capital to help people grow their net worth, track their cash flow, x-ray their portfolios for excessive fees, and plan for retirement. The more you know about your money, the better you can grow your wealth!

You can sign up to receive his articles via email every time they are published three times a week. Sam also sends out a private quarterly newsletter with information on where he's investing his money and more sensitive information. December 7, at 5: I am disappointed to hear about the hike in FICA taxes.

I look forward to that time of year when I hit the cap and see an increase in my paycheck right before the holidays strike! I was not aware of all the types of income not subject to payroll taxes. That is great information. It certainly makes me more motivated to create additional passive income streams.

I am currently trying to build my rental property portfolio, especially now that I know the income is not subject to payroll taxes. The drive to increase my passive income streams is what keeps me motivated to continue to work this W-2 job! My ultimate goal is to retire by 50 13 years from nowbut I am willing to do anything I can to move that date up.

December 7, at 6: The combined contribution limit is around 53K if I remember correctly so if you were contributing less than the max available to you based on earnings, you could increase the employer portion to get your income underAm I thinking about this correctly?

The solo k contribution comes second.

The SE tax is based on gross income. BTW, I heard this is a great time to apply for a government job. They are hiring like crazy because they think Trump will cut government jobs. December 7, at 9: December 7, at 7: Fortunately for the government and your fellow citizens, contributions to your k are still subject to social security and medicare tax.

We appreciate your contribution! I am on the fence whether social security should be properly viewed as a tax or if it is forced savings by the government. Of course, if I never receive social security benefits it will be a tax, but if I do receive the benefits I suppose I could look at it as the government forcing me to contribute to my retirement savings.

Part of the problem is that we likely will not get back what we put in. I am glad there is a cap on the Social security tax because they could very easily do away with that one day too.

Seeing the first big paycheck after the SS tax is paid is always an exciting day.

Full Time Finance says. December 7, at 8: I think the fundamental issue is it takes money to make those assets that are not subject to social security, so to get there you have to pay it in the first place for a number of years. Simply put the higher your network the more flexibility you have on where your income is sourced. Nobody would agree that having a payout cap is fair if there is no cap to payroll tax earnings. That would be too socialist, even for the bluest states.

I agree that uncapping the tax part but capping the payout part is unfair but I am concerned that in the future that will be pushed. The sole reason being that there a lot of voters that make between k that would revolt if you increased their social security taxes. I guess the over k earners would be mad too but there may not be enough over k voters to be a concern. December 7, at If they die, their kids get survivor benefits.

When they retire, they get payouts from the system just like everyone else. Social Security is a safety net for all of us. December 8, at December 10, at 3: If we push the retirement age back 5 years that would make it work as well. Gotta insure its solvency. Get on board and do your part man.

Just a couple more years. The only way I know to lower your income from your paycheck is to contribute to your FSA or HSA accounts, but both of those accounts are capped by law. If you work for a corporation you are pretty much stuck paying this tax! I knew the FICA number was going up, but that increase hurts. It was nice to get the little bump in the 4th quarter, but I guess a big chunk of that is going away in It really does look like the middle class will lose out if the Trump tax plan pans out.

Looks like the government is taking that plan to heart! I agree with Sam. Create as many sources of income as possible for retirement. On the other hand, rejoice if you are paying taxes. That means you are making a sufficient income to keep you and the country going.

Use the tax laws and common sense to keep your taxes in check, but to constantly complain about paying taxes is wasted effort. Move onto something positive that makes more money. With the sale of our small business after 20 years, I looked forward to a heathy and secure ever after life. As we started retirement we had a major surprise when the largest insurance company in California went bankrupt. Social Security saved us.

But learned an interesting fact about the SS system… they keep taxing you on money earned after Forever it seems as I am now age 80, work seasonally, and I still pay into the SS system without increases to my monthly check. That just plain sucks!!!

How Much Money Can You Make in Without Reducing Your Social Security Check? -- The Motley Fool

In my opinion, we need an expanded retirement system such as that in Australia, the Netherlands, Canada as several other countries which includes a three tier system that allows everyone who has worked a decent retirement. Believe me, having worked as a community college teacher for 20 years, and then 20 years with my own business, there is no comparison.

This works…and it should be a model for the entire country, privately or publicly employed. In the meantime…fund as many sources as possible until the USA gets its act together.

Unfortunely, it looks like this may take a long, very long time! December 7, at 2: It should be noted that if you have a government pension and also worked long enough to qualify for a social security benefit, social security applies the Windfall Exclusion Penalty WEP which reduces your social security benefit up to 40 percent. If you pay into social security for a minimum 35 years then the WEP is not applied. Anything less than 35 years and the WEP percentage grows larger as less years are worked paying into social security.

December 8, at 9: As I undertsand it, your example is only for those states who have elected to not have SS as part of their retirement system. This is state driven. It is true for federal employees as well. In California as an example where I taught, public employees opted out and your example would apply to them. However, at the outset, Oregon elected to be part of the SS system so that public employees would pay into both the SS and State PERS systems.

So…check your state if not a federal employee. I think in the long run that it is best to be included in both systems. This requires payment of approximately 7. It seems harsh at first but works out great in the long run. In Oregon, the teachers negotiated for school districts to pay their state contribution since they were denied salary increases for several years.

Can you discuss more about the insurance company bankruptcy? Is there no protection or recovery of such assets? That is a huge amount of money to go missing. The best jobs are those with pensions for life. They may be a little soul sucking, but they are WINNERS in retirement over many private sector employees.

Further, you can always start a side hustle. As rates dropped, EX Life declared bankruptcy which was a major blow since it was the largest insurance company in Can i earn income while on social security. Milken went to jail for a few years, he is a billionaire today a I understand it.

This bankruptcy was a major blow to the state since many pensions were tied into the company. The governor tried to make sure that annuity holders were compensated, but the process dragged on and on for years with no certainty.

Finally, three years later, they gave holders an option to bow out with pennies on the dollar or go with a French Insurance Company Aurora. It was a total fiasco fret with uncertainty. Our financial advisors threw their arms in the air and basically said we were screwed either way.

Think twice, no, three times before buying an insurance annuity. It is only as good as the financial standing of the company you puchase it from. Annuities are not guaranteed by the Federal or State Governments as some people think. If so, not too bad yeah? The evaluation of a financial institution for a long term deal is so key. One has to lean towards the mega banks as a result e. I also love USAA. By jumping into a law enforcement career, you no longer have to pay for Social Security.

However your fate is now controlled by CalPERS, expect a There is no escape outside of saving and passive income. Thanks for the reminder, Sam. The Green Swan says. My plan is to work hard, efficiently, save and then retire early. Accumulate wealth young, let it compound and then wipe out most of my income taxes.

As you stated, live off my investments. Always max out your k contribution and then price action forex strategy pdf extra money after.

Your Guide to Working While Collecting Social Security -- The Motley Fool

The key is to make it a habit and live within your remaining income. How Much Should I Have In My k By Age? Its a very progressive tax. Those that paid the least get the most, its the definition of progressive. Its not as if taxes just magically disappear above this point. Just the SS tax, and it should as those people contributing are basically subsidizing those who will receive it.

SS is not that hard to fix, and will probably be totally fine with very minor adjustments or simple demographics. Blue bell stock market symbol of those people who dont make enough money to pay much in taxes get some back at the end of year, and some earn money by submitting links get more than they would have been liable for by way of credits, etc….

Poorer workers pay a greater proportion of their income in Social Security taxes than richer workers — i. Ideally, ALL taxes would be progressive i.

December 10, at Not simply compared to their income. Especially after considering actual net taxes paid which is low for the majority. Its basically a strawman argument to attempt to divorce the payroll tax from overall tax burden and effective overall rates.

Define poorer, then show what they actually pay overall in effective taxes. The median income in the US is about 52k. You can argue its your opinion its not progressive enough, but its not regressive. We even have data for all this of course.

Higher income filers are also more likely to be self employed and pay There is not zero proof of that, just look at any finance forum, people do less than they can at top rates for just that reason. Now, Im not arguing the marginal rate needs to be reduced or anything, as we are not anywhere near that kind of context anymore, nor as progressive as then.

The debate is not about is it progressive or not, but is it enough and what are the effects? You have to balance productivity and receipts, incentives, and how it affects inequality.

These are separate but important issues. Everyone here seems focused on the working rich, when its really the 0. No thanks, I dont need it and enjoy time with the earn money clicking ads india. Sometimes Im thankful for the rates so that I do not just become a crazy workaholic and enjoy life, and Im certainly not the only one.

Im also not against paying my fair share or really care that I wont even come close to getting a return on SS, its my patriotic duty and its fine. It may not be perfect, but unless you talk about things in a real way you arent doing your particular sides point any good. December 21, at 5: Social security payouts are HEAVILY subsidized by middle class and wealthy taxpayers.

Low income earners get back way more than they pay taxes for. It goes to subsidize low income earners. December 7, at 3: Finance invest stock market beginners philippines, who can take anything away anymore?

At the end of the day, everything gets normalized. Great post on the benefits of creating more passive income.

If not, no big deal. Just count it as another generous contribution to the government. Completely agree Sam … which is exactly why I focused on building income from stocks, REITs, bonds, and preferred shares. Why work harder just to get taxed more? Earn income from places taxed at lower rates! But there is Medicare tax you get to avoid. December 8, at 1: That is the exact strategy my accountant has me follow. The rest is distributions. I could probably pay myself a little less and take more distributions but feel its just not worth risking an schools sharemarket game to save list of stock brokers in ghana couple grand a year.

Off topic from this post but based on your Venture debt investing posts, I decided to contact a few firms that may be currently raising funds.

Can you share your due diligence process when you invested in venture debt? The company i am looking at is Trinity Capital Investment.

December 8, at 2: Is it really true your kids can go to college for free even if your net worth is 10 million? That is very interesting…. The income hurdles will obviously change go up in the future due to inflation. Students will still be expected to contribute toward their own expenses from their summer income, part-time work during the school year, and their own savings.

We encourage any family concerned about the ability to pay for a Stanford education to complete the application process. If we are not able to offer need-based scholarship funds we will recommend available loan programs. These levels have been set based on typical cost of living in the United States.

These same levels may not apply to families living outside of the United States; aid eligibility will be determined based on individual family financial circumstances. December can i earn income while on social security, at December 9, at 3: The key is, they will jutawan forex indonesia know you have 10 million because there are plenty of ways to hide your wealth.

The rest are supposedly on athletic scholarships or are paying full fare. December 8, at 8: But I do like being able to save that extra money away. Would almost prefer having the Airbnb income as income that I could put into a Solo k, even if I had to pay the SE taxes on it.

Also, SF is totally clamping down and want all this information about the host. As a professor with college age kids, I can tell you that income AND wealth are taken into account when determining financial aid at most universities and colleges in the US.

While there are scholarships mostly merit-based that do not take ability to pay into account, need-based financial aid, Pell grants, and student loans generally rely on the FAFSA https: A higher EFC means that you will offered less or no need-based financial aid.

The FAFSA determines your income from your Federal Tax Return and also requires the disclosure of assets not learning money printable worksheets the equity your primary residence or retirement savings.

Assets in the students name count more when calculating the EFC. There are plenty of online calculators that will estimate your EFC e. There are games to play to manipulate the EFC to be lower, but it requires multi-year planning. And, in most cases, to continue to qualify for need-based financial aid, you must submit a new FAFSA each year that your child is in college.

My friend went to Georgetown U for free. Income is always reported to your name, unless you earn cash. But yes, start making less income years BEFORE college dear parents! Be wealthy, earn poorly. My kids get free tuition if they choose to attend the where I work. Unfortunately, my kids want to be engineers and I teach at a liberal arts university. There are programs that can get free tuition with other universities, but the number of available slots is rather limited.

While a family business may be excluded if it meet certain legal requirements, rental properties cannot be treated as small business http: A couple good articles for those interested in this topic as well as other details about how colleges determine need-based financial aid: The bottom line is exactly what you stated—start preparing well before you kid s are college age. Great post, I touched on some of the same topics in my post about SS tax this past October.

As some others commented it is essentially forced saving on the working class, which has positives and negatives but the doubling of the tax for entrepreneurs is just not fair. It creates a huge incentive to build up passive income through wealth as you pointed out. In New York the state guarantees them which gives the state reason to highly regulate the insurance companies.

One strategy people have suggested is to buy a long term bond of an insurance company instead of an annuity because you get the same counterparts risk but with a likely higher return if held to maturity.

Just a thought for the long term planning types. This topic has been on my mind this week as well with the increase in the Social Security tax cap and essentially getting a pay cut for I just actually posted this morning about how most Americans, including myself, are actually paying MORE in FICA taxes than they are in Federal income taxes. I DO believe millennials are currently paying too much for FICA taxes because our future benefit is very uncertain.

I personally will be taking many of your suggestions to increase passive income and gain the benefit from decreased FICA taxes as well as more favorable federal tax rates. December 8, at 7: Was going to try and wait until interest rates jumped up even more to buy the fund at a low low price, or dump everything extra into a high yield vanguard dividend fund. Currently trying out realtyshares and lendingclub. Also started my own website to see if I can build some more passive income readysetfive Thanks for your blog, learning a lot every time I come here.

December 9, at 4: So most people want to pay less taxes. What else is new? Take a look at USA total share of GDP paid in taxes versus other developed countries and you will see we are at the low end. Given that, the logical discussion is who pays what share, not lowering the total. My personal view on this is corp and wealthy America have snookered everyone into making their share lower than it used to be and frankly I think their share should increase. But reasonable people can disagree on that.

There is really no debate that the corporate contribution has been cut dramatically for several decades, and that the 0. They just prefer we not mention it. December 9, at 9: There was a research study done by economists showing that the per capita G. The New York Times wrote an article on the study: I need to save some write-offs for because that will be the year I hopefully switch to FT at my personal business.

Controlling my AGI will be imperative. Gold Medal Finance says. December 13, at 9: Vanity asside, it is only really the money that actually hits your bank account which is even remotely relevant! December 22, at 8: Yes I plan on building dividend, municipal bond, and rental income to reach FI in 8 years. I hope the IRS will make no changes to that type of income in the tax code. You make K in passive income and still work or are you FI? Still work by writing content on Financial Samurai and doing some occassional corporate and private 1X1 consulting.

My ideal number of hours to work to week is around February 13, at 7: I love that you not only explain what they are, but also how to avoid them by earning income sources that are immune to FICA! What I found especially intriguing is that the US Gov.

My guess is that they are choosing to tax the wealthier more and leave people who make less than K alone. The best thing we can all do right now is switch our income sources so that we can keep more of it for ourselves.

February 19, at 1: Maybe I can get some advice from readers. I am 46 years old. I retire from the Army next Aug. I will go back to work as a physician assistant in the civilian sector overseas on a one year contract making I have not invested in any stocks, bonds, or Ks due to piling everything into getting my rental properties paid in full.

I plan on purchasing 2 more rental properties upon return from the contract for a total of What should I be doing now as far as other investments such as stocks, bonds, TSP, K that would make more sense than my current plan or in addition to it? Once my house is paid off, my monthly living expenses will only be 4K.

Smart people here so I appreciate any feedback. June 4, at 3: Focus on acquiring more cash flow rental properties for the long haul. Your email address will not be published. Don't subscribe All Replies to my comments Notify me of followup comments via e-mail.

You can also subscribe without commenting. Sign Up For The Private Financial Samurai Newsletter! Financial Samurai Slicing Through Money's Mysteries. About Free Wealth Management Top Financial Products How To Start A Blog Negotiate Your Freedom. Income Types Not Subject To Social Security Tax: Earn More Tax Efficiently! Posted by Financial Samurai 63 Comments The government gonna knock you out! Subscribe To Private Newsletter Enter your email address David, Can you discuss more about the insurance company bankruptcy?

Sam…it is a bit more complicated I admit but with similar results. Hi Sam, Great advice! There are 3 income bands that are taxed. And now you want to tax high earners EVEN MORE? How is that fair? Nobody in SF cares how much anybody makes for what type of job they do. Hi Sam, That is the exact strategy my accountant has me follow. Hi Sam Off topic from this post but based on your Venture debt investing posts, I decided to contact a few firms that may be currently raising funds.

Any ideas on how I can reduce my tax liability on that Airbnb income? Thanks for the great article! Leave a Reply Cancel reply Your email address will not be published.

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