How can deciding how to receive income minimise the amount of tax you have to pay? Please help?

Question

How do different forms of income minimise the amount of tax you have to pay? Please help

Answer 1

Some types of income are taxed at different rates than others. For example, if you work as an independent contractor rather than as an employee, you'll pay an extra amount for social security and medicare. And long term capital gains are taxed at a lower rate than other types of income, so for example if you want to sell an asset, waiting until you've owned it for a year and a day can lower taxes on any gain.

And some items can be taken out pre-tax, like 401K contributions and sometimes health insurance and other items.

For the most part, income is what it is, and you can't decide to receive it differently and be taxed less.

Answer 2

I'm not sure what you're asking. Income is taxable, regardless of how it is paid. You could opt for company stock instead of cash, and some highly compensated executives do just that, but it would attract the same tax liability as if you were paid in cash.

Answer 3

Gift income is tax free... Next best is long term capital gains, worst is ordinary income like salary.

Answer 4

Ask your Human Resources department, they will be able to provide you with their best estimate.