Paying as Little in Taxes as Possible

[Spiffster]

We have been getting taxed into oblivion these last couple years and would like to do everything I can to pay as little as possible this next tax season.

Both my wife and I work. I have also started Uber-ing this last couple of months just on Friday and Saturday nights, mostly for the social aspect since I get to sit in a data center by myself during the week. We will probably gross 160K this year putting us in upper middle class for our area (Denver).

Proposed tax overhaul will likely not benefit us at all.

Being somewhat self employed (Uber) would I benefit from starting an LLC? I know I can write off mileage incurred while Uber-ing, but I dont need an LLC to do that AFAIK. I apologize for my ignorance as I have just started doing research. Just like with Uber, any tips are greatly appreciated. ;-)

[kork13]

We have been getting taxed into oblivion these last couple years and would like to do everything I can to pay as little as possible this next tax season.

Both my wife and I work. I have also started Uber-ing this last couple of months just on Friday and Saturday nights, mostly for the social aspect since I get to sit in a data center by myself during the week. We will probably gross 160K this year putting us in upper middle class for our area (Denver).

Proposed tax overhaul will likely not benefit us at all.

Being somewhat self employed (Uber) would I benefit from starting an LLC? I know I can write off mileage incurred while Uber-ing, but I dont need an LLC to do that AFAIK. I apologize for my ignorance as I have just started doing research. Just like with Uber, any tips are greatly appreciated. ;-)

As I understand it (upcoming or recent court rulings notwithstanding), you are considered an independent contractor by Uber...? While that status does allow you to register as an LLC (limited liability company), keep in mind that with minor exception, a single owner (or married couple owned) LLC serves only that one purpose -- limiting your potential vulnerability to liability claims. However, the annual registration fees & separate insurance policy likely is not worth the expense. The LLC would almost certainly be treated as a pass-through corporation, wherein you pay taxes for the LLC as if they were your own personally. Thus, your tax bill would be unchanged. You'll still have to pay the same income and FICA taxes for your self-employment income, regardless of your status as either an LLC or a private person/contractor.

I would just recommend that you talk to your auto insurer, ensure that they're aware you are driving for Uber (many companies require that a policy rider to be included with your insurance), and you might consider increasing your medical & liability coverages.

The only tax benefits you may be able to claim would be deducting your expenses for the miles, insurance, and gas (unless those are both included in the mileage rate?). Additionally, you can also open up a SEP-IRA if you'd like. I don't know the rules involved with how much you can contribute, but it might be an option to consider.

[Spiffster]

Thanks kork13, this was exactly the information I was looking for.

Looks like registering an LLC would not be worth the extra hassle.

From the research I have done it does look like the mileage deduction is supposed to cover anything related to automotive expenses. So, from what I understand, if I use that standard deduction I cannot deduct things like maintenance, tires, gas, etc. I will probably just use the standard mileage deduction to keep things simple.

For the car I use for Uber I do have (and pay extra for) the ride-share endorsement. Its only about $10 more per month.

[Singuy]

Sorry to say but there's really not much you can do to offset taxes. We don't own a corporation..we can't reinvest into our company with our profit and convert our profits into capital gain via stocks like Jeff Bezos.

Too late for you but the best tax break is probably the don't get married tax break. Not only will you not be paying the marriage tax penalty, but you can also claim head of the household which yields more tax breaks. For this reason, I know people who has marriages that are not legally bound.

[sblatner]

You should also be able to deduct a portion of your cell phone and internet since you use those for your Uber job.

[LivingAlmostLarge]

Actually marriage can be a benefit depending on the differential in income.

[colby99]

My focus is on techniques that are available and are clearly legitimate.

Owe money to the bank: on a fairly broad basis, interest payments are removed from the taxable income of corporations. Companies with stable revenue streams can increase their size using debt as leverage and reduce their tax bill. In the USA interest payments on certain types of borrowing can be deducted from taxable income. The most common one is mortgage interest. People literally buy a more expensive home in order to reduce their tax bill. You can also deduct $2500 of student loan interest, so you’ve borrowed to invest in yourself and are deducting the interest payments. In some other countries, debt interest is deductible, but I’m not at all an expert.

Defer Income: There are multiple ways to defer income. One of the most straightforward is to defer recognizing investment returns by using a pre-tax retirement savings program. For example, the 401k system allows your investments to grow with no capital gains tax until you start to withdraw them in retirement. Buying and holding shares in companies that prefer stock repurchases to dividend payments, or even just pursuing a buy-and-hold investment strategy are also ways to defer income.

Invest and spend in tax-advantaged ways: Investing in a retirement program? That income may be removed from your tax bill. Investing in education or training? Quite often this expense can reduce your net income. You can buy tax-free municipal bonds too. I wouldn’t recommend it, generally, since the price on the bonds assumes you have a very large income and the value of the tax-free status is priced in as though you are Ross Perot not Ross from Friends.

Move to a lower tax jurisdiction: An individual has less flexibility here than a corporation, but it is still an option. In the USA, it can be quite easy, for example by moving from California (~10% income tax) to Texas (0 income tax). I live in Pennsylvania, and by moving from Philadelphia to the suburbs I decreased my income tax by 3.5% (although my property tax increased…). You can’t readily play the shell game of setting up an offshore tax-haven because you are taxed on your global income in the USA. In other countries, like Canada, you can relocate to an off-shore tax haven and do all sorts of clever things, but you need to be careful where your income comes from.

I’m certain there are people who can come up with clever strategies to take advantage of transfer-pricing schemes or much more detail on the legitimate use of off-shore tax havens, but I am not that person.

[TexasHusker]

We have been getting taxed into oblivion these last couple years and would like to do everything I can to pay as little as possible this next tax season.

Both my wife and I work. I have also started Uber-ing this last couple of months just on Friday and Saturday nights, mostly for the social aspect since I get to sit in a data center by myself during the week. We will probably gross 160K this year putting us in upper middle class for our area (Denver).

Proposed tax overhaul will likely not benefit us at all.

Being somewhat self employed (Uber) would I benefit from starting an LLC? I know I can write off mileage incurred while Uber-ing, but I dont need an LLC to do that AFAIK. I apologize for my ignorance as I have just started doing research. Just like with Uber, any tips are greatly appreciated. ;-)

An LLC isn’t going to reduce your taxes by even a dime. An LLC is what it’s name implies: LIMITED LIABILITY company. If set up and run correctly, an LLC protects your personal assets and shields them from the ongoings of the LLC. There is great value in that.

[TexasHusker]

I’ll add this: Real estate investments can lower your tax liability considerably: I know of a fellow earning over $25,000 per month who pays little to no income tax - he has a large real estate portfolio and is afforded tremendous tax deductions that offset most of his income.

[prosper]

We have been getting taxed into oblivion these last couple years and would like to do everything I can to pay as little as possible this next tax season.

Both my wife and I work. I have also started Uber-ing this last couple of months just on Friday and Saturday nights, mostly for the social aspect since I get to sit in a data center by myself during the week. We will probably gross 160K this year putting us in upper middle class for our area (Denver).

Proposed tax overhaul will likely not benefit us at all.

Being somewhat self employed (Uber) would I benefit from starting an LLC? I know I can write off mileage incurred while Uber-ing, but I dont need an LLC to do that AFAIK. I apologize for my ignorance as I have just started doing research. Just like with Uber, any tips are greatly appreciated. ;-)

I did my own taxes for years. I finally decided to let a CPA process my taxes and it was well worth it. I would seek the help of a professional.

[SavingMoneyGoals]

My personal opinion is: get someone professional to work out your taxes. Even though you might see the expense to hire a CPA as an extra one you may do without, in my case I managed to save a lot on taxes with the professional's help. Quite worth it in the end!

[Fishindude77]

My personal opinion is: get someone professional to work out your taxes. Even though you might see the expense to hire a CPA as an extra one you may do without, in my case I managed to save a lot on taxes with the professional's help. Quite worth it in the end!

Good advice !
Unless you break the law, you can't escape taxes. Griping about paying too much taxes are "high class problems".

[Gailete]

We have been getting taxed into oblivion these last couple years and would like to do everything I can to pay as little as possible this next tax season.

Both my wife and I work. I have also started Uber-ing this last couple of months just on Friday and Saturday nights, mostly for the social aspect since I get to sit in a data center by myself during the week. We will probably gross 160K this year putting us in upper middle class for our area (Denver).

Proposed tax overhaul will likely not benefit us at all.

Being somewhat self employed (Uber) would I benefit from starting an LLC? I know I can write off mileage incurred while Uber-ing, but I dont need an LLC to do that AFAIK. I apologize for my ignorance as I have just started doing research. Just like with Uber, any tips are greatly appreciated. ;-)

Back when I was still working I had to drive a lot for work, our mileage reimbursement was a nice chunk of change and covered everything. I kept everything I was repaid into a savings account that other than gas fill ups, and when my car needed things or repairs, I pulled the money out of that account. After 3 years of doing that, I was ahead.

I assume that you aren't getting reimbursed from Uber for miles, but the same thing holds true. Set that amount of money aside yourself and you may find that after awhile anything for the car you need you can pay for without having without scrounging for it.

As you are working that job as self-employment, you should also be eligible for tucking money into retirement accounts but you will have to check on those or someone here may tell you.