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I've taken early retirement but plan to work part-time soon. I will have independent contractor status.

My wife's salary and investment income put us at the marginal rate of 35% federal income tax. Thus everything I earn will be taxed at 35% + 9% state income tax + double FICA, that is, over 50% even counting the federal deduction for state taxes.

I won't have many business deductions--mileage and part of my cell phone bill is about all. No home office, no equipment or wardrobe, maybe a dictionary or two.

It's a low-paying job that I'm doing mostly for enjoyment and to pick up a few bucks for toys. I've already done the work on a volunteer basis and figure it would be nice to get paid for it as well. I estimate my yearly earnings will be around $15K.

The question is: Can I defer income tax on all or most of my earnings with a Keogh or SEPP IRA? At the same time I would take an equal amount out of a money market fund (money which has already been taxed and saved) for spending--it would be like having tax-free income, except for FICA.

For 2002 we had an AMT of about $350. Does the AMT affect my ability to use a Keogh or SEPP IRA in a tax-efficient manner?


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