7 ms·

Comparing $90k as a W2 employee doesn't really compare to making $112k as a LLC or contractor. Taxes, health insurance, retirement... On the other hand, his am

Comparing $90k as a W2 employee doesn't really compare to making $112k as a LLC or contractor. Taxes, health insurance, retirement... On the other hand, his amounts are going up, so I'm interested to see how high they will go, and what it will consistently level out at.

viklove 6y ago
Comparing working as a W2 employee doesn't really compare to working as a contractor. Getting to choose your own hours, the direction of your project, who you get to work with, etc. is far more valuable to me than a bit more money.
- cpitman 6y ago
  The article is the one that compared the two, saying that he now makes "more". It is completely correct that you cannot directly compare W2+Benefits to Contractor Revenue. The rule of thumb is to add 50% to a W2 salary to include health insurance and other benefits. So he is nearly there, but not yet.
- bufferoverflow 6y ago
  I worked as a contractor in 1099 for years. It was exactly the same as W2, except I had to pay estimated taxes 4 times a year. I didn't get to choose hours, direction, who to work with. I think you're confusing it with personal projects.
  - balls187 6y ago
    > I didn't get to choose hours, direction, who to work with. There is nuance in that statement. The IRS has a test for whether a person is an employee or a contractor. https://www.irs.gov/newsroom/understanding-employee-vs-contractor-designation https://www.irs.gov/newsroom/understanding-employee-vs-contr...
jermaustin1 6y ago
If you set the entity up correctly and work with a decent accountant, your $112k turns into more like $40k taxable, and if you are married, that $40k drops to $20k @ 10% + $20k @ 12% or ~ $4500 in taxes.
- komali2 6y ago
  This is news to me so I'm just saying, if you wrote about this in more detail, I'd read the shit out of it.
  - bklyn11201 6y ago
    I think what he's generally saying: aggressively deduct expenses used to support your business. This would include rent, home office, computers, phones to conduct business, business meetings, travel, health insurance, retirement, etc. Then the member and spouse would draw low salaries putting you in low income bracket and thus low taxation. The 2017 TCJA further reduced taxation for business owners via the Qualified Business Income (QBI 20%) deduction.
    - jldugger 6y ago
      I suspect a large part of it is a SEP IRA which lets you pack away like 57k in a tax advantaged account. Business deductions are almost like icing on the cake vs that.
      - redisman 6y ago
        Deductions sound good to people who haven't actually run a business or thought very hard about it. You have to be purchasing stuff to deduct. As a software engineer why not just not buy stuff since all you really need is a computer. Then you keep 100% of that money rather than 10%. Some outliers are home office and utilities and things like that.
        snowwrestler 6y ago
encoderer 6y ago
You're right. The 112k as his own small business is far, far better. What he's built has real durable value and new people will continue to pay for old content.

viklove 6y ago

Comparing working as a W2 employee doesn't really compare to working as a contractor. Getting to choose your own hours, the direction of your project, who you get to work with, etc. is far more valuable to me than a bit more money.

cpitman 6y ago
The article is the one that compared the two, saying that he now makes "more". It is completely correct that you cannot directly compare W2+Benefits to Contractor Revenue. The rule of thumb is to add 50% to a W2 salary to include health insurance and other benefits. So he is nearly there, but not yet.
bufferoverflow 6y ago
I worked as a contractor in 1099 for years. It was exactly the same as W2, except I had to pay estimated taxes 4 times a year. I didn't get to choose hours, direction, who to work with. I think you're confusing it with personal projects.
- balls187 6y ago
  > I didn't get to choose hours, direction, who to work with. There is nuance in that statement. The IRS has a test for whether a person is an employee or a contractor. https://www.irs.gov/newsroom/understanding-employee-vs-contractor-designation https://www.irs.gov/newsroom/understanding-employee-vs-contr...

jermaustin1 6y ago

If you set the entity up correctly and work with a decent accountant, your $112k turns into more like $40k taxable, and if you are married, that $40k drops to $20k @ 10% + $20k @ 12% or ~ $4500 in taxes.

komali2 6y ago
This is news to me so I'm just saying, if you wrote about this in more detail, I'd read the shit out of it.
- bklyn11201 6y ago
  I think what he's generally saying: aggressively deduct expenses used to support your business. This would include rent, home office, computers, phones to conduct business, business meetings, travel, health insurance, retirement, etc. Then the member and spouse would draw low salaries putting you in low income bracket and thus low taxation. The 2017 TCJA further reduced taxation for business owners via the Qualified Business Income (QBI 20%) deduction.
  - jldugger 6y ago
    I suspect a large part of it is a SEP IRA which lets you pack away like 57k in a tax advantaged account. Business deductions are almost like icing on the cake vs that.
    - redisman 6y ago
      Deductions sound good to people who haven't actually run a business or thought very hard about it. You have to be purchasing stuff to deduct. As a software engineer why not just not buy stuff since all you really need is a computer. Then you keep 100% of that money rather than 10%. Some outliers are home office and utilities and things like that.
      - snowwrestler 6y ago

encoderer 6y ago

You're right. The 112k as his own small business is far, far better. What he's built has real durable value and new people will continue to pay for old content.