I've been reading articles about people getting negative taxes, and am curious about how much someone can actually earn and still pay 0 or negative taxes.

Suppose I have an LLC, and my wife and I are paid as employees.

I plan on having the LLC maximize employer contribution to both our 401ks, which I believe should be 25% of our employee income? And also maximize both of our 401ks through employee contributions. ($19000 each)

Assuming California state taxes at the 2019 rate.

Standard deduction for filing jointly. ($24000)

If possible, use the Savers credit, EITC (refundable), and child tax credit for 1 child (refundable).

I have 2 questions. First, what is the maximum my LLC can earn and so that I can pay exactly 0 taxes?

Second question: What is the maximum negative taxes I can owe after the refundable tax credits?

I'm new to this, but by my numbers, I can earn roughly $100k in my LLC, and still pay roughly negative $4k taxes? Does that sound about right? It seems too good to be true.

  • Couple of notes: (1) You and your wife may be able to do an IRA as well. (2) LLC is not a federal designation. For tax purposes, it's either a corporation or a sole proprietorship/partnership. (3) employer contributions for sole proprietorship/partnership can't exceed 20%. Details matter a lot and rules are many, so your best bet to to fill out your sample tax forms using made-up numbers and then see how it works out.
    – farnsy
    Jul 30 '19 at 19:23

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