From what I'm reading, and I'm in Illinois, United States, I have to pay at least 35% on my AdSense earnings? This is insane!
Of course you have to pay takes. You also have to pay 15.3% SS & medicare. You'll also be required to make quarterly estimated payments next year to avoid penalties. Depending on how much you are making, you should consult with a CPA because you and the IRS will get a 1099 from google.
On Brazil we have hot girls + good beachs and only $20 taxes for each check, so if i get 100kk i will still pay the same...
No way man. I'm in Illinois too, I hope Rod Blagojevich didn't make some gay new law about it. Is this for everybody in the U.S. or just Illinois people? At 35% of your total check, what's really the point?
You have to take the time to learn how to play the game. Keep good records of your income and expenses; you pay taxes on what's left
go to an accountant and learn how to get your total income after expenses as low as you can I read here on DP someone bought a truck as an expense for operating the business
If you are paying 35% of your adsense income in taxes then you probably need a better accountant. mhdoc made a great point, you ahve to know how to play the game. You have federal and state taxes to consider. I keep excellent records thru the year and store all my receipts in a folder by month. Last year my total fed/state tax payout for adsense was 12% of my total adsense income. How you do this legally is a discussion on its own. The past two years I have been taking 100% of my adsense profits and rolling it into preconstruction real estate and then renting out the homes. My goal is to sell the new homes when they are about 5 years old before they start to need maintenance and reinvest the funds again. In the meantime you can take out an equity line of credit on the equity of the homes as a tax free income until you sell them. Not for everyone, but it works and definetely diversifies your business.
I think the person who stated 35% was talking about Federal and State combined. It looks like Illinois has a flat rate state tax of 3%. There is no single answer on what the total you will wind up paying because Federal Tax depends on your net income - and what state you live in (some do not have a state income tax), whether you are married or head of household, etc. Federal income taxes run from 10% to 35%, so if someone is paying a low percentage, it means they have very little net income. Self-employed income is also subject to a 15.3% tax for Social Security and Medicare. The only way to avoid paying some of this is to form a corporation and pay part of the profits in the form a dividend - but you must pay yourself a market rate salary (which is subject to the 15.3%). If you make enough money, you can wind up paying around 50% of your net profit in taxes. Equipment purchases for the business are deductible as well as other expenses. Anyone who is making significant income should really seek advice from a local CPA to plan in advance. There are pretty hefty penalties for late payments or not making the correct estimated payments in advance of the end of the year (if you had income last year). Adsense income, as well as other forms of income (affiliate payments) get reported to the IRS and you are asking for serious problems if you don't pay what is owed.
Wow, thanks to Redback and mjewel for the helpful posts. I'm not going to be making much on Adsense. I can't see myself making more than a couple grand a year at most. So I should be looking at paying around 20% in income taxes I'm guessing. I have to gain the courage to fill out these income tax forms on Adsense.
Welcome to America Taxes suck, but get write-offs and stuff to help cushion it. That's what I Did and it's helping a lot.
mjewel makes some good and accurate points. The 12% i mentioned that i payed was leveraged from high expenses and low net income. Remember that you would rather pay 12% on $1 net income than 0% on no income. A large % of my adsense income is paid out in office and maintenance expenses and thru my website and real estate ventures. My actual bring home profit after expenses and taxes is very small. However, I reinvest into the company without taking profits off the table in hopes that it will pay off in a few years.
Is it Adsense earnings, or profit from Google? Say my check from Adsense is $1k, but I spent $400 on Adwords. Only $600 is taxable, correct?
It's net income after expenses and deductions. Adwords is certainly an expense, so is your internet connection, business equipment purchases made during the year (computer) etc.