💸 Make Money vs. Earn Money: Why Business Owners Build Wealth Faster
Here’s a hot take: The IRS seems to love entrepreneurs more than employees. 😳 Sounds wild, right? But stick with us—and we’ll show you why making money through a business can build wealth faster than earning money through a paycheck.
If you’re trading hours for a W-2, you earn money → get taxed → then spend what’s left. But when you own a business, you make money → spend (on tax-deductible things like your phone, car, gym, and retirement) → then pay taxes on what’s left.
One builds wealth. The other builds tax bills.
Let’s break it all down in real-talk terms so you can decide: Do you want to keep earning… or start making? 💰
🧾 W-2 Workers: You Get Taxed Before You Touch It
Here’s what your money life looks like as a W-2 employee:
Earn → Taxed → Spend
That means your boss pays you, but Uncle Sam gets the first slice. Between federal income tax, state tax, and payroll taxes (Social Security & Medicare), it’s not unusual to lose 25–35% before your paycheck hits your account. 🫣
📊 Let’s Talk Numbers:
Alice earns $100,000.
After payroll and income taxes, she nets around $74,000.
And if she wants to buy a laptop for work or attend a conference? That’s all coming out of post-tax dollars. Ouch.
What She Can Deduct:
✅ Limited 401(k) contributions
✅ Maybe an HSA or FSA (if her employer offers it)
❌ No more unreimbursed work expenses (thanks, 2018 tax law)
🧠 Business Owners: Spend Before You’re Taxed
When you own a business, the tax code flips the script:
Make Money → Spend (on your biz) → Pay Tax on What’s Left
This simple change puts power back in your hands. 🙌 You decide how your income is spent—on legit business needs before taxes come knocking.
📊 Let’s Talk Numbers:
Bob owns a marketing agency and brings in $100,000.
He writes off $30,000 in business expenses (software, equipment, travel).
He qualifies for the QBI deduction—another $14,000 off his taxable income.
End result? Bob only pays taxes on $56,000. That’s $10K+ saved compared to Alice. 💥
🔥 Tax Perks That Employees Only Wish They Had
Here’s what business owners can do that W-2 earners usually can’t:
🏋️♂️ Pre-Tax Perks & Benefits
✅ Health Insurance: Deduct 100% of your premiums (yes, even for your family)
✅ Gym Memberships: Deductible if it’s part of a wellness program 🏃♀️
✅ Home Office: Deduct rent, utilities, internet (based on business use) 🏠
✅ Business Vehicle: Mileage or actual expenses—plus gas 🚗
✅ Training & Courses: Business-related education? Write it off 🎓
💰 Retirement Power-Ups
- Solo 401(k): Contribute up to $69,000 in 2024 (employee + employer!) 💪
- SEP IRA: Up to 25% of compensation or $69,000—whichever is lower
- All contributions grow tax-deferred and reduce your taxable income today
📦 Bonus Fringe Benefits
- Section 125 “Cafeteria Plans” for health, childcare, commuting
- Section 127 Plans to help pay for education—tax-free
- Company phone, internet, meals, travel, uniforms—all deductible if business-related
💼 W-2 vs Business Owner: Head-to-Head Showdown
| 💼 Category | 👩💻 W-2 Employee (Earn) | 🚀 Small Biz Owner (Make) |
| 💸 Income Order | Earn → Tax → Spend | Make → Spend → Tax |
| 📉 Tax Flexibility | Very limited | High |
| 🧓 Retirement Limits | Up to $23,500 (plus catch-up) | Up to $69,000 |
| 🏥 Healthcare Deduction | Only what employer offers | Full family premiums |
| 📚 Education & Tools | Not deductible | Deductible if business use |
| 🧾 Tax Exposure | Full income taxed | Net income taxed after deductions |
🚀 Strategies to Start “Making Money” (Even on the Side)
You don’t have to quit your job today—but you can start shifting from earner to maker. Here’s how:
💼 1. Start a Legit Side Hustle
Turn your hobby into a business. Sell crafts? Teach piano? Freelance? Congrats—you’re a business owner (and now you can deduct your laptop, software, and marketing expenses). 💻
👨👩👧👦 2. Hire Your Spouse or Kids
Paying your spouse or teen for real work lets you shift income into lower tax brackets—plus, it’s deductible.
🧮 3. Elect S-Corp Status
Once your business profits exceed ~$50K, filing as an S-Corp can save big on self-employment taxes. Split income between salary and dividends for max efficiency.
⏳ 4. Time Income & Expenses
Want to reduce taxes this year? Delay income, accelerate expenses. Want to boost next year’s deductions? Do the opposite. It’s your call.
🧠 5. Plan for Optimal Tax Brackets
Aim to stay within the 12–22% bracket range by controlling net profit and maximizing deductions. Layer in QBI, retirement, and health benefits, and your effective tax rate can drop way down.
⚠️ Pro Tip: These strategies can get tricky. Chat with a CPA or financial planner to build a customized tax game plan.
🎯 The Wealth System Favors the Makers
When it comes to wealth-building, the tax code is crystal clear: Entrepreneurs get the advantage. From flexible income strategies to deductible lifestyle perks, owning a business can radically shift how much wealth you keep.
Sure, being a W-2 earner is simple and steady—but the system doesn’t reward simple. It rewards strategy. 📈
So if you’ve ever thought, “There has to be a better way…” — you’re right. It’s called making money, not just earning it.
At Show You The Money Academy…
We turn the complicated into the clear, the intimidating into the empowering, and the boring into something you’ll actually enjoy learning about. 🎉
We’re not just here to crunch numbers—we’re here to educate you, entertain you, and most importantly, Show You The Money.
If you’re ready to retire smart, stay flexible, and feel confident about your future—we’ve got you covered. 💼💪
This is personal finance, made simple, fun, and actionable.
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