Managing Side Income from Online Earnings. Tax Question
I am located in USA.
I have a full time job where I earn a decent pay. Apart from that I earn good amount (less than full time) from my side ventures. On my side venture I earned around 20K in 2017. The company is not part of LLC. I am the sole owner.
My question is that 20K + full time salary puts me in a different tax bracket where I own quite a bit of tax (00+).
I don't have much expenses that I can claim in my side venture since everything is online. I have already claimed home office, Mac, phone, internet etc
Is there anyway I can take the money from my side income and put that in some sort of savings account which can help me bring down by total gross income hence bringing down the tax I owe. What can I do with my side income so that it does not increase my tax bracket?
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As a sole proprietor, you really can't shield your income from taxes easily. You can invest some of it in a self employed IRA (sometimes called a solo IRA). You can contribute 25% of your side income up to k/year. In your example, that would shield k of your k.
A different (some would say better) option is to put your side income into a Roth IRA up to the maximum allowable (assuming you make south of approximately 0k/year). That doesn't shield your side income from taxes now, but forever more that account is not taxed (earnings, interest, dividends, principle).
Either of the above options locks your money away and it can be expensive (IRS penalties) to get it out before age 59 1/2. If you're looking for a way to shield side income from taxes and have access to it earlier, than you'll have to set up an LLC. That's a whole other level of complication involving a different set of tax rules (which have just changed in 2018 in a major way).
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