The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Kapyarn on April 02, 2025, 11:16:28 AM
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Having some idle time, I was wondering if there may be some jobs out there that would provide deferred income, such that it does not increase my MAGI. I want to maintain my current level of income (from interest and a 72t) so I would not want to take on any work that increased my MAGI unless it was a huge increase (like $100k+ a year) that required very little time and was fun. I don't see that option so was looking around at other things, maybe stuff I could do off and on as I saw fit. Looking for non volunteer type things.
Stuff I have thought about:
Adding/building on our home. Currently doing this already and a bit tired of it, but I can see how it is adding (slowly) some future value for work done today without realizing any income. It costs a fair bit in materials though and you have to be careful that you don't overspend and not actually add any value.
Renovating other homes, to sell in the future. Again, a bit tired and worried about the initial cost, plus carrying cost if I get really tired of it and end up with a unfinished home that I still have to pay taxes on.
Writing. Seems a flooded field and I don't think I am particularly talented, even though I have interesting plot ideas. Very cheap to get into and income (if ever) is realized as later in life as you want (if you don't publish).
Collecting stuff to be recycled. This could be interesting if done cheaply. You would need a place to store it, but if someone were able to collect free or nearly free waste items, dismantle them for the valuable resources, then cheaply dispose of the waste, I could see this being a fun hobby income that you could defer until you sold the resource materials scavanged.
Mining bitcoin. That ship has probably sailed. Would have been awesome to do this in 2012 or so. Y'all should have told me.
Gold prospecting. I love gold prospecting. You can spend a lot of money and get not much, but it is fun. It seems like there should be a way to make at least minimum wage though doing this if you could figure it out, because otherwise, why would anyone mine? I don't think income would be realized until you sold the gold...especially if it is still in concentrate form in 5 gallon buckets, unknown weight.
Any other ideas?
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Any sort of buy-refurbish-resell business seems like it would fit the bill. It would have to be something that retains value on a resale market, so all I can really think of is cars and computers/phones, but maybe there are other niches out there. Maybe furniture, though probably for lower profit margins?
Plus any of these approaches involve developing a skill, which should make it more fulfilling as a hobby.
Crafting skills (e.g. woodworking) would probably also be similar, although the number of hobbyists out there makes me think it would be hard to make serious money doing it.
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Another one I thought about was ginseng. Evidently it is quite profitable but takes 5+ years for the roots to mature.
Problem is it is pretty regulated, certificates and such needed, plus I think the deer on our mountain property would eat it all.
Still, growing some item that you can sell later is an idea to generate deferred income.
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I wonder if you could simply create an LLC, fund it with personal money, then just never take money out of the LLC or pay yourself a salary, and invest it in stocks in the name of the LLC instead.
I'm not a legal expert at all, but if this could be done the sky is the limit then. Lawn mowing business? Check. Small machine shop and repair facility in your garage? Check. Becoming a yoga instructor? Check.
Again - I have no idea of this is legal or not but this would be my first thought.
ETA: I wonder if you could combine an LLC with a solo 401k and get the effect you're looking for of not increasing personal MAGI. Hmmm...
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I like the idea of planting ginseng. There is a broad spectrum from basically running a farm to just tossing out more seeds in woodland that you either own or are legally allowed to harvest from (in many states you can buy permit to harvest some amount of ginseng from public forests, usually from the same places you buy fishing licenses or similar) and are confident no one else is going to come find the plants you seeded.
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What about non-cash rewards? e.g. grow a garden or keep a few chickens and it pays you in food. Help your neighbors with projects and they'll help you at some time in the future. Invest time in learning a new skill or foreign language, or even in increasing your personal fitness to reduce future medical costs. Attend or host in person social events to make friends. Etc.
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I am growing ginseng currently. And the long term financial gain was my plan. Nothing has been sold and the oldest are probably 4 to 5 years old.
The plant has specific requirements but nothing terribly difficult. The seeds were purchased and planted for a couple years. Now the plants are creating seeds, like compound interest. Self perpetuating.
So if you have your long term home and or property to work with, might as well give it a shot. $45-50 will give you more seeds than you will want to physically plant. Then repeat next fall.
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Do you live near SW Washington?
https://chinookobserver.com/2021/02/11/treasured-experience-benson-beachs-black-sands-beckon-gold-prospectors/
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From your examples I don't think this is exactly what you're looking for, but you can defer most of the income from a job that provides a 401(k) or from self employment if you open a solo 401(k) as long as you don't earn too much. You can defer up to $23.5k to the 401(k) and $7k each to your and a spouse's traditional IRAs if you have sufficient earned income. If you and a spouse both worked you could double the 401(k) contribution, but the total IRA limit wouldn't change since you can contribute based on either your own or your spouse's earned income. There are IRA deduction limits (https://www.irs.gov/retirement-plans/ira-deduction-limits) if your total earned and unearned income is too high.
The math changes a little with self employment income such that you could earn even a little more than the previous numbers would suggest without paying additional income tax (although you'd pay self employment tax, which could increase your eventual social security benefit depending on past earnings). There are also some ways to convert spending you already do into business expenses for an extra deduction like claiming a deduction for the business portion of the use of equipment (say a computer) or a home office deduction if you have a space in your home that you don't really use and could set aside for exclusive use by your business.
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I wonder if you could simply create an LLC, fund it with personal money, then just never take money out of the LLC or pay yourself a salary, and invest it in stocks in the name of the LLC instead.
I think all LLCs are pass through entities (taxed as either S-Corps or sole proprietors), so that won't work, but your idea might work with a C-corp, although there might be rules around paying a minimum salary (there are for S-corps). Most small business owners avoid C-corps (preferring the previously mentioned pass through entities) since they're taxed at the corporate level and then again when they distribute income (wage income isn't taxed twice since it's an expense for the business), but maybe in certain situations it would work out.
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I believe it is possible for an LLC to elect to be taxed as a c-corp.
As terran mentions, that means the income would still be taxable for the company at 21%. And then if you wanted to get the money out of the company it'd be as dividends which would incur another (up to) 23.8% tax. So you're left with (1-.21)*(1-.238) = 0.602 or just over 60% of your money.
For S corps I know you can get in trouble with the IRS for paying yourself an unreasonable low salary and for C corps I know you can get into trouble for paying an unreasonably high salary. I'm not sure if C corps can get in trouble for paying an unreasonably low salary but it would be something to consider.
There's also the Personal Holding Company tax that could come into play (essentially a special tax on companies that look like a way to defer income and keep investments off the individual's tax return) if you built up a lot of assets in the company though earning income but not distributing the resulting money.