Could you Enjoy a Non-Existent Income Tax Rate just like

Could you Enjoy a Non-Existent Income Tax Rate just like GE?

When the New York Times broke the story of how General Electric has been making billions (no surprise there) but hasn't paying exactly nothing in federal corporate income taxes and is even expecting a refund on no taxes paid (big surprise there), the average working stiff waiting in line to pay the IRS was understandably outraged. But the outrage has given way to a certain amount of grudging admiration. And people are beginning to wonder if they can get that kind of understanding from the IRS. Is that really possible? Can you really have a 0% income tax rate without living on the street under a sheet of newspaper? Let's see, shall we?

The easiest way to make that happen would be to actually own your own business - to be self-employed, as it were. If you have a small business as a contractor or something, or if you are a consultant, pulling this off could be possible. Let's set things up so that you own your own business and you make $1,40,000 in your first year. Now in you first year in business, the government throws you a bone - you get $10,000 written off as startup expenses. For every year after that, you can write off half as much. And then there is the area of creative accounting known as legitimate business expenses. You can write these off. What exactly you can get away with calling a business expense is of course something that tends to be kind of up in the air. You could claim that lots of different kinds of purchases in your life were for your business - you can take a business interest in the slopes of Aspen and the beaches of Baja. Every computer or smartphone you buy, you could buy for your business but use it for personal purposes just the same. Business expenses, if you are creative can conceivably help you write off about $12,000 a year. We are approaching those 0% income tax rate already.

How about the Social Security and Medicare taxes you have to pay? Even GE pays these; someone in business for himself, would have to pay both for the employer and for the employee. And that could add up to something like $17,000 or so. But even so, half of that, you can deduct from your taxable income. All of this doesn't seem like much; but there is a lot of good news you have in the tax breaks you get on your retirement and investment accounts. Start a self-employed 401(k) and you can put by something around $40,000 a year and write it off to. Does $40,000 seem like a lot? You get that much because if you're self-employed, you're both the owner and the ownee (to coin a word). As an employee, you set aside something for your 401(k); and as the owner of the business, you can contribute a very generous company match. When you are your own boss, you can certainly treat yourself very well.

There are lots of other things you can do too to approach the 0% interest rate. You can write off your mortgage interest, the premiums you pay for your family's health insurance, whatever you pay in student loan interest, what you pay for your children's college; there is the personal tax exemption you get for you and your wife that's worth $10,000. If you know what to do, tax time can be pretty fun.

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