I m considering a home-based business and I m wondering how the taxes will differ compared to my current salary, assuming all other elements are remaining the same. (Please note, I m not asking about the forms to use, how to submit tax information, or taking obscure deductions into consideration; I have already read up on all of these items.)I currently have a salary of $80,000. Based on what I actually bring home, roughly 35% of my paycheck currently goes to taxes (ridiculous, isn t it?). If I were to stop my corporate job and do a home-based business full time, what % increase or decrease could I expect in taxes for a sole proprietor that makes enough money to qualify as income. Again, I m not considering deductions like running a business out of my primary residence, business travel expenses, etc. I m strictly comparing taxes to taxes.It may not be possible as there are tons of factors to consider, but if anyone has insight, personal experience, or even a rough idea to guide me, that d be great!
As an employee you are paying 6.2% for Social Security and 1.45% for Medicare. Those will double when you become self employed, but the additional amount you pay is deductible for income tax purposes.As for your income tax there are too many variables to consider. The primary variable would be your income from the business. You do need to consider those deductions you call obscure , because they could be significant. In my business they are significant and make up for the extra FICA taxes I pay.
When you are self employed, you pay the employer s share of fica/mc, so our tax bill will go UP 7.65%.
