I am located in USA.

I have a full time job where I earn a decent pay. Apart from that I earn good amount (less than full time) from my side ventures. On my side venture I earned around 20K in 2017. The company is not part of LLC. I am the sole owner.

My question is that 20K + full time salary puts me in a different tax bracket where I own quite a bit of tax ($4500+).

I don't have much expenses that I can claim in my side venture since everything is online. I have already claimed home office, Mac, phone, internet etc

Is there anyway I can take the money from my side income and put that in some sort of savings account which can help me bring down by total gross income hence bringing down the tax I owe. What can I do with my side income so that it does not increase my tax bracket?

  • 1
    the extremely simple answer is, sadly, "No" :O
    – Fattie
    Commented Jan 30, 2018 at 2:19

1 Answer 1


As a sole proprietor, you really can't shield your income from taxes easily. You can invest some of it in a self employed IRA (sometimes called a solo IRA). You can contribute 25% of your side income up to $54k/year. In your example, that would shield $5k of your $20k.

A different (some would say better) option is to put your side income into a Roth IRA up to the maximum allowable (assuming you make south of approximately $160k/year). That doesn't shield your side income from taxes now, but forever more that account is not taxed (earnings, interest, dividends, principle).

Either of the above options locks your money away and it can be expensive (IRS penalties) to get it out before age 59 1/2. If you're looking for a way to shield side income from taxes and have access to it earlier, than you'll have to set up an LLC. That's a whole other level of complication involving a different set of tax rules (which have just changed in 2018 in a major way).

  • Thanks a lot! Yes excellent advice. I already have a Roth IRA where I contribute some amount. I need to check the Max (married filing jointly). I think in Roth IRA you can withdraw your contributions for special purposes but not the profit (I can be wrong). I have an LLC but I don't use it. How can one put money aside and use it if they have an LLC.
    – john doe
    Commented Jan 29, 2018 at 18:18
  • I need to make one clarification. Is there anyway to deduct the contributions to the Roth IRA account from Taxes? I mean can I contribute the max limit to the Roth IRA and then subtract if from my gross income so I don't get taxed too much. I believe the answer is NO :)
    – john doe
    Commented Jan 29, 2018 at 18:58
  • 1
    no - the rules for Roth IRAs are that you contribute with post-tax dollars. Your investment returns are not taxed when you remove them. It most situations, this is a better outcome (for the individual) than putting pre-tax money in a traditional IRA and paying taxes when you take it out. There are no great solutions - if there were, everyone would use them. Choose the least bad situation based on your circumstances.
    – rocketman
    Commented Jan 30, 2018 at 4:52
  • 1
    Do you mean a Solo 401k? All IRAs are "solo" in that they are individual accounts.
    – BrenBarn
    Commented Jan 30, 2018 at 6:04
  • 1
    "solo IRA" should be in quotes. It's synonymous with "self employed IRA", which is a more apt and descriptive term. You're right, the "I" in IRA is for individual.
    – rocketman
    Commented Jan 30, 2018 at 16:20

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