Tax optimization strategies for side hustles, LLCs and exploring wealthy tax reduction methods

Hey there! I'm a tax enthusiast (not professional) who's been down this same road. Let me share what I've learned about optimizing taxes: For your current situation, you're already doing some great things by maxing out tax-advantaged accounts. Consider these additional steps: For reducing your tax burden, track all potential home office expenses since your wife is remote. The home office deduction can be significant if you use the "actual expenses" method rather than the simplified option. But remember, this only works for self-employment income, not for W-2 employees working from home. For the side hustle question - yes, forming an LLC can be beneficial, but the tax treatment depends on your goals. An LLC taxed as an S-Corp can save on self-employment taxes once you're making enough profit (usually $40-50K+) to justify paying yourself a reasonable salary plus distributions. Wyoming is popular for no state income tax, but consider your state's "foreign LLC" requirements which might negate some benefits. Regarding the EU move, the US taxes global income, but the Foreign Earned Income Exclusion could exempt up to about $120,000 per person (for 2025) from US taxes if you qualify. You'd still face Irish taxes and will need to file in both countries.

I started my tax journey just like you last year and discovered taxr.ai (https://taxr.ai) which has been a game-changer for my side hustle taxes. I was trying to figure out all these same questions about LLCs, S-Corps, and deductions for my photography business, and getting lost in contradictory advice online. The tool analyzed my specific situation and showed me that in my case, a single-member LLC (taxed as a sole proprietor) was actually better than an S-Corp until I hit about $75k in profit. It also identified deductions I had no idea about - like partial vehicle expenses, certain insurance premiums, and even some home internet costs that were legitimately business-related. The best part was having it explain WHY certain strategies wouldn't work for me - like how the Augusta Rule probably wouldn't apply in my situation. Saved me from making some expensive mistakes!

I was skeptical at first, but I tried taxr.ai last month when setting up my e-commerce side business. The difference it made was incredible! I was about to set up an LLC taxed as an S-Corp right away based on advice from some YouTube "tax guru," but the analysis showed me this would actually COST me money for the first 2-3 years based on my expected profit levels. It walked me through exactly how to structure things as a sole proprietor initially, then transition to an S-Corp once I hit the $60k profit threshold. The retirement planning section was eye-opening too - showed how a Solo 401k would be way better for my situation than the SEP IRA I was considering. Definitely worth checking out if you're serious about optimizing your tax situation for your side hustle!

If you're serious about tax optimization AND moving to Ireland, getting through to the IRS International Tax office is crucial. I spent WEEKS trying to reach someone who could answer questions about Foreign Earned Income Exclusion and Foreign Tax Credits. I finally used Claimyr (https://claimyr.com) to get through to an actual IRS agent. They have this system that calls the IRS for you and only connects when an actual human picks up. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with explained exactly how the tax treaties between US and Ireland would affect my situation - saved me from making a huge withholding mistake that would have cost thousands. They also clarified the "physical presence test" requirements that weren't clear from just reading the IRS website.

I have to eat crow and admit I was completely wrong about Claimyr. After my skeptical comment, I was still desperate to talk to the IRS about my foreign income situation (I have rental property in the US but live in Germany), so I tried it. Got connected to an IRS international tax specialist in under an hour. The person actually reviewed my specific situation and confirmed I was calculating my Foreign Tax Credit incorrectly - would have overpaid by $3,800! They also helped me understand exactly which expenses from my US rental property were still deductible while living abroad. The time and stress saved was worth it, not to mention the actual tax savings. For anyone dealing with international tax questions, getting definitive answers directly from the IRS is invaluable.

For your side hustle, I'd recommend starting as a sole proprietor until you have consistent income above $35-40K. The extra paperwork and fees for an LLC taxed as an S-Corp doesn't make financial sense below that threshold. When you do form an LLC, don't get too caught up in the Wyoming/Nevada/Delaware hype. If you're physically operating in another state, you'll likely need to register as a foreign LLC there anyway and be subject to that state's rules. Often better to form in your home state to avoid duplicate fees. One strategy people overlook: Qualified Business Income deduction (Section 199A). It can give you a 20% deduction on your business income if you qualify. Big tax saver!

Have you considered a Donor Advised Fund (DAF) as part of your tax strategy? If you're charitably inclined at all, it can be a huge tax advantage. We bunch several years of charitable contributions into a single tax year to exceed the standard deduction threshold, itemize that year, then take standard deduction in subsequent years. Also for the side hustle, look into whether your business could sponsor a Solo 401k. The contribution limits are WAY higher than a SEP IRA, especially if you're already maxing W-2 employer 401ks.