If you are healthy and have no dependents (thus don't have unusual/expensive medical insurance needs) then the best salary tip I've found is to be a 1099 contractor over a W2 employee. This is especially so if you are in a work-at-will State like California.
When you've done your interview and the company is ready to make you an offer you can straight-up tell them you'd prefer a 1099 based relationship over W2. They may not like it or prefer that, but obviously the market for software engineering is a seller's market.
You can usually expect to make at least 30% more like-for-like as a contractor because you're going to have to look after your own medical insurance, tax affairs and pension, etc.
Don't forget that $100k offer the firm is going to pay you actually costs them more like $130k in terms of benefits, payroll tax, etc. So why not just ask them to give the full $130l to you? Plus you may be able to negotiate even more on top of that.
The real fun happens when you start to make legitimate tax deductions that as a W2 employee you can't normally make. Computer equipment, software, ipads, games consoles, phone bill, meals with other people in the industry, etc. I bet you work from home too sometimes, so deduct a %age of your rent and utilities.
These are all legitimate business expenses which are hard or impossible to deduct as a W2.
The net benefit in terms of your annual take home pay is potentially going be a lot more than the advice given by the OP - although there is no reason to combine all of this together.
(BTW Recruiters won't suggest this tip because their remuneration usually is based on W2 salary, and not contract positions)
I bet you work from home too sometimes, so deduct a %age of your rent and utilities.
This is usually a big red flag for IRS audits. It's my understanding you have to have a dedicated area just for work. So lounging on your couch wouldn't count. A corner desk or separate office is fine I think.
A corner desk is probably not enough. You really need to have a completely separate office area that is used 100% for work. Last I checked, the home office also must be for the benefit of the employer and not only for the employee. Add in that your chances of being audited go up significantly with a home office deduction and it makes it a risk that needs to be weighed carefully. Definitely find a CPA and get them onboard before trying to claim the home office deduction.
Agreed. I'd recommend against this every time, unless you are 100% prepared for the inconvenience and potential penalties of an audit. It's just not worth it.
Tax law doesn't allow this for engineers though - you can't be a 1 man consulting shop with a single employer. Most large tech firms hire contractors through third party consulting shops specifically to get around this.
Dubious tax advice aside, I've never worked at a company where the contractors are treated equally to the full time employees. I would never work as a contractor simply because you are setting yourself up as a 2nd class citizen.
In what aspects you think contractor is 2nd class citizen.
I personally like fact that I am paid at least 50% more and that I don't have to play corporate politics. And funny as it is there are companies where contractors are treated same as employees in most respects (aka. smart companies)
heck I had so many team lunches for successful milestone of project paid by company that I don't care to count
Though you will make more, you will be on the hook for 100% of payroll taxes rather than 50% as in a normal W2 relationship. It is also a lot easier to get let go.
When you've done your interview and the company is ready to make you an offer you can straight-up tell them you'd prefer a 1099 based relationship over W2. They may not like it or prefer that, but obviously the market for software engineering is a seller's market.
You can usually expect to make at least 30% more like-for-like as a contractor because you're going to have to look after your own medical insurance, tax affairs and pension, etc.
Don't forget that $100k offer the firm is going to pay you actually costs them more like $130k in terms of benefits, payroll tax, etc. So why not just ask them to give the full $130l to you? Plus you may be able to negotiate even more on top of that.
The real fun happens when you start to make legitimate tax deductions that as a W2 employee you can't normally make. Computer equipment, software, ipads, games consoles, phone bill, meals with other people in the industry, etc. I bet you work from home too sometimes, so deduct a %age of your rent and utilities.
These are all legitimate business expenses which are hard or impossible to deduct as a W2.
The net benefit in terms of your annual take home pay is potentially going be a lot more than the advice given by the OP - although there is no reason to combine all of this together.
(BTW Recruiters won't suggest this tip because their remuneration usually is based on W2 salary, and not contract positions)