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keep in mind, healthcare, taxes, and retirement costs are going to skyrocket. Uncle Sam hates it when you're not under the thumb of an employer. Only about a third of your hourly rate may actually make it to your checking account.



Health insurance is a problem. Solve it before you move to contracting.

Taxes, on the other hand, are completely skewed in favor of consulting. Look at 401k contributions, for example. The limit for your contribution is the same, but your company can contribute a lot more on top of that. And talk to your accountant about how you decide on your salary; that's an important number and it's not straightforward to decide what it is. (It's certainly not your entire income)


Or you can just do without healthcare. While there is some danger in that, it's considerably less dangerous than driving without seatbelts, which everyone used to do. I don't recommend no healthcare coverage, especially if you have a family in the childbearing years, but it's unlikely to be the end of the world, either, unless something really bad happens...


This has to be the worst advice I've ever read in this site


In other words, only part of your income is considered "salary" and thus subject to payroll tax. This often results in a significant tax reduction.


You can claim a lot of business expenses as deductions that you wouldnt be able to as an employee

The IRS now has a 20% deduction for passthrough entities up to 450K or so

You can put approximately 40K or 25% of income (whichever is less) into a solo 401K. Much more than a typical company 401K

There are ways to pay no FICA, by distributing through a limited partnership. You can save 15K up to the cap on those taxes, but then you will hurt your social security which requires 40 quarters of W2 wages to max out.

Healthcare will potentially cost more, but once you have around 6 employees you can join a PEO and get grouped in with other small business and get a typical cost for a business.

There are products (such as insurance ) that can shield a much larger portion of your income. For example, you buy income insurance that pays out any year you take a loss. You "pay" for it with your profit for that year. That counts as a business expense so you pay no tax on it. They keep track of your account balance+growth and you can borrow from your own account with no tax consequences. You can essentially withdraw the money at favorable tax rates if you ever take a loss.


I make 300k as a consultant in NYC - I paid about 97k in taxes and healthcare last year. It's not nearly that bad.


FWIW, my experience is closer to 55%, in a fairly high-tax state to boot.

It can be difficult, but it's not that bad.


Depends on what else you need to service your clients. Some types of consulting require flights, hotels, dinners, equipment, et c.


I never had travel or meals I didn't bill to a client, no. Negotiate better. ;)


I work with small companies.

Some clients prefer a simple bill and clear mental model of the costs. I make (slightly) more money on the bills in which I don’t break out my expenses than the ones that I do.




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