What effective tax rate can a small business owner realistically pay?
Answered independently in 2 episodes, by 2 different people. Every line below is verbatim from the transcript, timestamped to the moment it was said.
What the archive says
01Stop fixating on your bracket and calculate your effective tax rate - there are seven graduated brackets topping out at 37.5%, and nobody pays that on total income. source →
02A side hustle turns you into a small business: home office, auto, dining, computers, cell phone, family on payroll, Roth IRA and a solo 401k can leave you paying about 30% less tax on that income than W-2 pay. source →
03Know the difference between your bracket and your effective rate: there are seven brackets topping out at 37.5%, but nobody pays that overall because brackets are graduated and strategies like real estate depreciation or oil and gas deductions cut the effective rate. source →
What 2 people actually said
Make cash flow and resell it for 150 grand four years from now. The government needs drillers to go get natural gas and oil in the United States on US soil and will give you a tax credit and all of a sudden your effective tax rate goes from 25 percent down to 10 percent.
So when we have brackets, that's our bracket on the next dollar after a certain limit. So once everybody kind of gets that, that this is a graduated bracket, that's point number one. So then what we want to look at is what is your effective tax rate?