I am eligible to retire with a pension that will be roughly one fourth of what my pre-tax income is now. I would like to do consulting work full-time, but only if I can generate enough income--when added to what I'll be receiving from my pension, will approximate what I am making now. When working for myself, I know I'll be able to greatly reduce my tax liability compared with what I'm paying in taxes now. I would like to figure out how much I would need to make at my consulting work, when added to what I will receive from my pension, will give me roughly the same disposable income I have now. I know what is possible with the consulting work. I just need to know if it will be enough when factoring in the pension and changed tax liability. Are there any calculators out there that can do this? If not, what type of professional should I contact to help me with this, and how much would they probably charge for this?
2007-12-13 13:59:11 · 2 answers · asked by Joe 3 in Business & Finance ➔ Taxes ➔ United States
If you are consulting, you will pay about twice as much for social security and medicare than you did as an employee. Income tax on the same net amount will be the same. So your taxes will be about 7% higher on consulting than they were on a W-2.
The flip side is that you will have items you can deduct from your consulting income to get the net amount that's taxed - but remember, you'll have to put out the money for those expenses too.
You could spend an hour or so with a CPA who works with taxes, and they could probably give you a better feel for this. It would probably cost around $125-300.
2007-12-13 14:30:40 · answer #1 · answered by Judy 7 · 0⤊ 0⤋
visit daveramsey.com lots of good stuff to get u started and quaility people to help.
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2007-12-13 22:49:03 · answer #2 · answered by Anonymous · 0⤊ 0⤋