[SiliconSplash]

> The threshold to enter top 10% is only 180K

"*Only*" That is a lot of money for most people. How the other half live!

> The threshold to enter top 10% is only 180K

Yes. I was doing it when I was earning less than that as a contractor in the UK. I can tell you how it generally works in the UK:

* You set up a LTD company.

* You pay yourself a minimum salary where you pay the bare minimum tax this is approximately £13000 the last time I checked. I think you can pay any other "directors" this as well, you basically make your significant other one.

* Anything related to work becomes an expense e.g. parking tickets, mileage on your vehicle, laptop, computer software etc. So you don't pay this, the company does and thus you get a tax relief.

* You pay yourself dividends from your LTD company. You pay yourself the bare minimum and leave as much as possible in the company. These were taxed at a far lower rate that the equivalent money if you worked perm.

* You pay your pension via the company (this is tax free upto £60,000 IIRC).

In the US how it is exactly done will be of course different as the taxes are structured differently but I know for a fact that people are doing similar in the US.

[snowwrestler]

This has nothing to do with being rich, tons of middle class people in the U.S. apply these strategies. It is a benefit of being in business for yourself, which is offset by higher risk and higher direct costs for things like healthcare and services and equipment (because bigger companies get volume discounts).

A person paid on a W2 can’t do these things no matter how big their salary is.

[SiliconSplash]

I know it has nothing to do with being rich. I know middle class people do this in the US. He was asking how people could avoid it, the simplest way is to become a contractor/consultant/freelancer rather than a full time employee so *you can* restructure your tax.

[amazingamazing]

I can tell you that you cannot do this if you derive your living from a W2 income. as a contractor it's obviously different, but your experience is not really indicative of anything.

[SiliconSplash]

That is why many people become contractors/consultants/freelance when they are in the higher tax bands. Which was the point I was making, if people are being smart they will try to avoid the tax.