Consulting Business

First, congratulations on achieving FIRE and transitioning to low-commitment consulting—it’s an exciting transition, especially for a family of six!

On to your main question:

1. Quarterly Taxes (Estimated Taxes):

Yes, once you become self-employed, you are responsible for income and self-employment taxes (Social Security + Medicare). Depending on your estimated income ($20k-$75k), you may need to make quarterly estimated tax payments using Form 1040-ES. A good rule of thumb is to set aside 25% to 30% of your net income (after business expenses) for savings, but the exact amount will vary based on your deductions and other income.

2. Solo 401(k):

Of course you can—as long as you have self-employment income and no full-time employees (other than you and your spouse), you are eligible to open a Solo 401(k). You can contribute both:

Employee portion: Up to $23,000 ($30,500 for 50 and older)

Employer portion: Up to 20% of your net self-employment income

This is a great way to lower your taxable income and invest for the long term.

3. Capital Gains Planning (Rent + Stocks):

With projected long-term capital gains of around $130,000 and additional consulting income, now is definitely a good time to consider rental reductions or installment sales if possible. Since you are married with 4 children, you will also enjoy a higher standard deduction ($29,200 in 2024) and child tax credits, which will help offset some of the tax burden.

Other things to note:

Section 199A deductions are available for consulting income (20% pass-through, but with limitations)

HSA options are available if you are enrolled in a high-deductible health plan

If you have high child-rearing expenses, consider using a dependent care FSA, 529 plan, or Roth conversion in low-income years.

I recommend consulting with a CPA who is familiar with FIRE or focuses on self-employed individuals to help you plan your income and strategy for the year. Additionally, resources such as the ChooseFI Facebook group, the "Mad Fientist" blog, or Sean Mullaney's website (The FI Tax Guy) are a wealth of tax optimization information for FIREers.

Congratulations again and best wishes on your FIRE journey!

I second the suggestion to consult with a tax pro. It is more than worth the money. At first you may have to have several sessions to get everything organized and in order, but after that you probably will be fine with once a year and ad hoc for major major events. I've been self-employed for many years now and I have one meeting per year with my accountant/tax planner where we do my tax filing for the previous year and plan for the coming year.

You might want to consider asking a tax strategy pro since you have a lot of new taxable events this year. You’ll want to plan ahead. It would be worth the fee.

With selling the rental + selling stocks + job you’ll have a bunch of taxable income this year.

Something to consider if you are comfortable and it makes tax sense, but you can think about seller finance the property sale by accepting monthly payments from the buyer to keep your annual income lower to MAYBE reduce annual tax exposure.*

Some states have specific rules on independent contractor status. For example it might be more clear cut with your status 1099 vs w-2 if you’d have more than 1 client as a consultant. If you plan to do it next year too, you might want consider not being a sole proprietor but it’s easy if you are. It depends on your industry and if you need legal protection as a corporation.*

Yes, you might be able to open up a solo 401k or something similar depending on if you are a sole proprietor vs corp and if you have employees. There are different kinds.*

Sorry, I might have generated more questions than answers but you’re in a great spot and time in your financial life. Congrats!

*This is where a tax advisor can also help.