Reply to When making more actually is a real tax disadvantage?

Forum Index » Money and Finances

Reply to "When making more actually is a real tax disadvantage?"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous]I have always kind of rolled my eyes at people who complained about how earning more "costs" them in terms of taxes. But then this last year we experienced this and when I do the math on it, it really does not make sense.

My DH has a regular job but I am a part-time freelancer. In 2023, he received an 8% raise and I made about 16k more than I had the previous year (so from around 20k to around 36k -- now that our kid is in full-day school I have been able to boost how much I work plus clients are hiring me for more work). As a freelancer, that extra 14k is the result of a real increase in time spent working in a way that a regular raise is not. It actually reflects working basically twice as much in 2023 as in 2022 because not only did I have to bill significantly more to make that money, I also had to put in more unpaid time on developing that business plus the back office stuff I do myself -- invoicing, etc.

Last year we received a total tax refund of about 9k. Since I own my own business we have a lot of deductions, so it adds up.

This year we actually owe a small amount in federal taxes (less than $100, not a big deal) and will get just $500 back on our state refund. We had basically the exact same deductions this year as last, but between my DH's raise and my increased revenue, we bumped up enough in tax obligation that it wipes out more than half of my increase. I think I feel that more acute because, again, it's not like I got a raise for doing the same job. I literally worked twice as much. Having so much of that wiped out by taxes is depressing, especially because I'm trying to build a business from scratch and I'm still in early stages where every penny counts. It's demoralizing and I'm second-guessing my choice to do this even though in terms of my work and clients, the business feels like it's doing fairly well. I also think about how much I spend on childcare in the summer to enable me to do this and when you add that to the tax hit, it feels pointless.

Anyone else been through this? I'm trying to tell myself that I just need to push past it -- look for more ways to structure my taxes intelligently and also keep working to increase my billables. Maybe we just got unlucky in hitting an income level this year where the tax hit was just outsized compared to my income. But I'd love to hear from others who have dealt with similar issues. I'm between projects right now and should be working connections to get another project and instead I find myself wondering if I should take fewer projects this summer, save on childcare costs, and just make less while spending more time with my kid. Is that dumb?[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics