It's not about 'hiding' your income, the point is that the metric used to determine eligibility for certain credits, benefits, or subsidies in many US governmental programs (but not all) is exclusively based on either Adjusted Gross Income or Modified Adjusted Gross Income. These are metrics that are fairly flexible for the self-employed to track up to a fairly large gross income. So I guess this is a real case of Goodheart's law concerning the quantification of poverty and identifying who actually 'deserves' financial assistance from the public, or under my own optimistic interpretation is rather that the government is trying to incentivize you to be self-sufficient in taking care of your own retirement and responsible healthcare spending so that the federal government doesn't become insolvent with excessive social program spending. Maybe wishful thinking?
Some credits include the Saver's Credit (non-refundable), which is essentially free $1K from the federal government for contributing $2K to any retirement plan once you plan your AGI appropriately. Another is the Affordable Care Act Premium Tax Credit (refundable) which would cover any premiums bought on the healthcare.gov marketplace as a sole proprietor once you plan your AGI appropriately. There are many of these in the tax code if you hunt for them! :)
150% of poverty is around ~$17K on average across the US, while in higher cost-of-living areas it can be much higher.
So given a $17K MAGI target, you can use any of the various available deductions on a 1040 lines 23 -> 35, such as retirement plan pre-tax contributions, health savings account contribution, health insurance premium deduction, educator expenses, moving expenses, deductible part of self-employed tax, school tuition and fees, domestic production activities deduction (like the development of computer software as a contractor!), and presto! you're technically artificially near the poverty line and eligible for certain benefits. Just contributing to the basic IRA/i401K/HSA/PTC puts you at an available earning limit of around ~$85K gross income in an _average_ cost-of-living area, let alone the other deductions listed that can be available depending on your circumstances.
The drawback is that these are additional goodies from taxes _deferred_ and definitely should not be considered taxes _evaded_ which is highly illegal. It could be possible in the future that all your income deferred would actually be taxed a much higher rate than if you paid upfront today in the case of Roth contributions to qualified retirement plans. But it's also possible that the income tax rate goes down, or you're well off enough in the future to just donate it directly to causes you care about rather than allowing Uncle Sam to get his hands on distributing your hard-earned income, or you die and pass your stuff to people you directly care about rather than being absorbed into the operating revenue of the entire US.
As discussed in this thread lower down, this is most relevant as a way of smoothing out feast/famine cycles of contractor gigs, planning an early retirement, or in general just living a very stoic and frugal life that you can afford to defer gratification until later. "A tax deferred is a tax saved."
Some credits include the Saver's Credit (non-refundable), which is essentially free $1K from the federal government for contributing $2K to any retirement plan once you plan your AGI appropriately. Another is the Affordable Care Act Premium Tax Credit (refundable) which would cover any premiums bought on the healthcare.gov marketplace as a sole proprietor once you plan your AGI appropriately. There are many of these in the tax code if you hunt for them! :)
150% of poverty is around ~$17K on average across the US, while in higher cost-of-living areas it can be much higher.
So given a $17K MAGI target, you can use any of the various available deductions on a 1040 lines 23 -> 35, such as retirement plan pre-tax contributions, health savings account contribution, health insurance premium deduction, educator expenses, moving expenses, deductible part of self-employed tax, school tuition and fees, domestic production activities deduction (like the development of computer software as a contractor!), and presto! you're technically artificially near the poverty line and eligible for certain benefits. Just contributing to the basic IRA/i401K/HSA/PTC puts you at an available earning limit of around ~$85K gross income in an _average_ cost-of-living area, let alone the other deductions listed that can be available depending on your circumstances.
The drawback is that these are additional goodies from taxes _deferred_ and definitely should not be considered taxes _evaded_ which is highly illegal. It could be possible in the future that all your income deferred would actually be taxed a much higher rate than if you paid upfront today in the case of Roth contributions to qualified retirement plans. But it's also possible that the income tax rate goes down, or you're well off enough in the future to just donate it directly to causes you care about rather than allowing Uncle Sam to get his hands on distributing your hard-earned income, or you die and pass your stuff to people you directly care about rather than being absorbed into the operating revenue of the entire US.
As discussed in this thread lower down, this is most relevant as a way of smoothing out feast/famine cycles of contractor gigs, planning an early retirement, or in general just living a very stoic and frugal life that you can afford to defer gratification until later. "A tax deferred is a tax saved."