The average American income tax is 15%-28% depending on the tax-bracket (or classification) the individual qualifies for. For example, married couples with a gross income between $68,001 – $137,300 would be taxed 25% on their earnings. The higher your income the higher percent tax increase. Unfortunately, income tax-cuts are being threatened right now and Americans could be seeing an increase in income tax within the next couple months. It is likely that high-earner households ($250,000+) will see almost a 5% increase from 35% up to 39.6% tax rate. So how do we keep our hard-earned money when we are seeing more and more come in and go right back out to uncle Sam before we even get a chance to say bye bye?
As of the laws and regulations today, a typical income for an employee (you would know by filing a W2) contains deductions taken from that income in the form of federal and state taxes, deferred compensation and social security contributions. The qualifying tax deductions (AKA protecting your money from taxation) for a W2 only include six write-offs: Roth IRAs and charitable donations to name a few. However, when you own your own business you are open to over 100 tax deductions including: business expenses, home office, auto expense, travel expense, interest on loans, start-up expenses and many more. To learn more about protecting your money as a small-business entrepreneur, I encourage you to check out this article from entrepreneur.com about small-business tax deductions.
In his book, Rich Dad Poor Dad, Robert Kiyosaki talks about how entrepreneurs get-ahead financially by protecting there money from taxation. He concluded that as a business owner, he paid less taxes based on percentage (even making millions of dollars) than most of his employees who earned average income. To protect your money from uncle Sam you must think like a business owner, not an employee!