Barbara Weltman at AuctionBytes.com:
If you run a profitable eBay business, full-time or part-time, you may be able to gain tax relief and build up retirement savings through a qualified retirement plan and/or IRA.
For example, if you net $40,000 from an eBay business and make a tax-deductible contribution of $5,000 to a retirement plan, you only pay income tax now on $35,000.
If you’re in the 25% tax bracket, the write-off essentially means that the contribution is only costing you $3,750 out-of-pocket; the government is contributing $1,250 through the taxes you save by making the contribution.
The type of plan you use and the amount of money you put into it depends on several factors, including how much you want or can afford to save, whether you have other retirement plans, whether you have employees, and your years until retirement.
Even though the tax year for 2006 has closed, the ability to fund retirement plans for tax advantage on 2006 remains open. Assuming you are eligible, you can set up and contribute to a traditional or Roth IRA up to the due date of the 2006 income tax return, which is April 17, 2007.
For more details, see IRS Publication 560, Retirement Plans for Small Business and IRS Publication 590, Individual Retirement Arrangements.
Photo by woodsy.
No comments yet.