Did you know it’s not preordained that you must lose money in the stock market? If you use the strategies of indexing and resetting you can grow your money without the risk of stock market losses. Enjoy this quick video explaining these two powerful yet little used strategies and let us know if we can help further.
This article is the last in a series of pieces on how to dramatically reduce your income taxes legally and ethically. If you missed the first two you can review them before moving on to this article; Giving Yourself a Pay Raise – Beating the Biggest Wealth Drain and Give Yourself A Raise. These other two articles discuss the hundreds of deductions you qualify for when you own a business as opposed to being an employee. First we show you how everyone can have a small business even if they’re a current employee working for someone else. Specifically we talked about 4 strategies out of those many hundred of deductions that you can start to use immediately to increase your net take home pay. Now let’s talk about the 5th and a special discussion on a superior business structure for successful businesses to lower their taxes by 50% or more.
TAX DEDUCTION 5 $25,000 Vehicle Deduction
Per Section 179, you may be able to expense some or all of your business use of your vehicle. Basically, if your vehicle weighs more than 6,000 pounds, you can expense up to $25,000 the first year the vehicle is used in your business. You also must use the vehicle at least 50% for business in order to qualify. The $25,000 deduction assumes 100% business use. If you use your vehicle 75% for business, you would get 75% of the $25,000 or $18,750.
Car Used Less Than 50% for Business
If the business use of your car drops to 50% or less, there are certain rules that apply. These include:
- You cannot take a Section 179 deduction for your heavy vehicle.
- You must use the straight-line method of depreciating your vehicle. While the five-year period still applies, this will result in a lower depreciation deduction in the earlier years.These 5 strategies are just the tip of the iceberg that I mention here and in the other two articles.
These 5 strategies are just the tip of the iceberg that I mention here and in the other two articles.
If you are already a successful business owner and feel like you are implementing every legitimate tax deduction, but are still paying $150,000 or more in annual income taxes there is a different specific strategy for you. There is a little known company structure that may help you save 50% or more on your income taxes every year. We call this our income efficiency strategy and work in conjunction with a very high level attorney to structure these programs. It is very unlikely your current tax professional will be aware of this business structure but this attorney has been utilizing them for clients since 1998. However, the attorney who sets these up will be happy to have conference calls with your tax professionals to explain the program in depth. This attorney is not trying to replace your current professional but rather work with them to implement this plan for your business.
You will utilize structures that have been around for decades and most tax professionals mistakenly believe are only good for public corporations. These are structures that Lowes®, Southwest Airlines®, and Home Depot® use just to name a few. Now the successful small business owner can utilize the same structures as the big boys thereby dramatically lowering your tax liability.
I don’t want to bore you with details here but if you are in that small group who are paying those kinds of taxes we have a real solution that has been looked at by the IRS several times since 1998 and every time there were no changes required for the client. In other words this is not some kind of a scam or loophole but rather a very specific company structure that will fit into your existing business model to dramatically reduce your income taxes. Send us an email at firstname.lastname@example.org with the subject line “income efficiency strategy” and we will have one of our professional teammates reach back out to you to see if we can help.
In last week’s article we gave you an introduction to the United States Tax code and why you need to take control of how much you pay to the government. This week we will give you the most powerful strategy to legally and dramatically reduce the amount you pay in taxes.
The #1 Tax Strategy in America – Do something with the INTENT to make a profit from your home!
The “Business” tax breaks were passed by Congress for 2 reasons:
1) To stimulate the economy by creating more businesses and more jobs.
2) Encourage people to have additional sources of income to pay off their debt and contribute to their retirement.
An activity with the INTENT to make a PROFIT, can be considered a “Business” and qualify for “Business” tax deductions. You can do this as a sole proprietor (in your own name) or as an entity (corporation, LLC, etc…) either way works. In order for a business to be able to deduct all ordinary and necessary business expenses it must be able to show that the business is being run with the reasonable intent of making a profit. You do not need to actually make a profit as long as you intend to make a profit.
So here are the requirements set forth by Congress
- Have the intent to make a profit
- Work your business on a regular & consistent basis
- Treat it like a business – Keep good records
Meet these 3 requirements and you can qualify for $1,000’s in new Tax Deductions.
So let me share with you just 4 of the many Tax Deductions you will qualify for when you take the time to meet the above 3 requirements.
TAX DEDUCTION 1 You cannot deduct expenses for attending a convention, seminar, or similar meeting held outside the North American area unless:
- The meeting is directly related to your trade or business, and
- It is reasonable to hold the meeting outside the North American area.
It is considered “REASONABLE” to have a business meeting in any of these countries! (See chapter 1 of IRS Publication 463)
TAX DEDUCTION 2 – Travel Rule Basics:
Basic Rule: For each business day of travel, you can deduct 100% of your lodging and 50 percent of your meals and entertainment.
Workdays: You can count a business day as any day during which your principal activity during normal business hours is the pursuit of business. You must work more than half of the workday.
Tried-to-work days: You count a business day as any day you intended to work but circumstances beyond your control prevented you from actively pursuing your business objective.
Weekends, holidays: If a weekend or holiday falls between two business days, the weekend or holiday is considered to be a business day and is tax deductible. This applies only when it is not be practical to return home for the weekend because of time required or expense involved.
Saturday night travel: Airlines sometimes charge you less if you stay over a Saturday night. If you can save money by staying over Saturday night, you count the stay-over as a business days.
Travel days: Travel days are business days.
TAX DEDUCTION 3 – Meals & Entertainment
The IRS considers “entertainment” to be any activity that provides “entertainment, amusement, or recreation, and includes meals provided to a customer or client.”
You are permitted to deduct 50% of all of your ordinary and necessary meals and entertainment costs for your business.
The 50% limitation applies to all meals (whether local or in travel status) and entertainment expenses.
In order to qualify for the deduction, you must discuss business during the entertainment (directly related entertainment) or immediately before or after the entertaining – within 24 hours (associated test for entertainment expenses).
You must be able to document Who, Where, When, What & Why. Most receipts have the Where & When printed on them – you just have to document the Who, What, & Why
- The Tax Code does not provide any guidance as to what constitutes a “substantial and bona fide” business discussion for purposes of meals and/or entertainment.
- There are no rules that specify how long the discussion must be before it will constitute a business discussion for deducting your meal or entertainment expenses.
- Your business discussion does not need to take a greater amount of time than your non-business discussions for the meal or entertainment expenses to become deductible.
- As long as a business discussion is the primary purpose of the entertaining, the expenses will qualify for a deduction.
TAX DEDUCTION 4 – Dutch Treat
DEDUCTING “DUTCH-TREAT” BUSINESS ENTERTAINMENT
Many business expenses do not involve paying the expenses of clients or prospects. They are Dutch-treat. Everyone pays for himself or herself.
But how do you handle Dutch-treat expenses? How do you know if they’re deductible?
General Dutch-Treat rule: IRS regulations state that the taxpayer may deduct entertainment “even though the expenditure relates to the taxpayer alone.” The IRS says its objective test precludes arguments that “entertainment” means only entertainment of others. Further, the IRS acknowledges that business entertainment may include an activity that satisfies a personal, family, or living expense. The IRS notes that an individual in business may deduct the entertainment cost, including his personal benefit, as a business expense.
Translation: Business entertainment deductions aren’t limited to the costs of treating others; you’re also allowed to deduct your own costs if you “go Dutch.”
Tune in next week when we will give you more strategies to reduce your income taxes thereby giving yourself a raise!
These next couple of articles will show you the US Tax Code as you probably have never seen it before. The tax code is over 70,000 pages of boredom and confusion and is designed so badly that even all the authors of the tax code really don’t have much idea of how the system actually works. You can be sure that the code is designed to be difficult and keep you, as the tax payer, intimidated and paying the most money possible to your old Uncle Sam.
Income taxes are the single biggest expense most Americans will ever have and yet very few people have a real clue how the system works. It is my belief that since you are going to pay taxes for your entire working lifetime and probably even some taxes after your death that you should have a handle on how they actually work and how to legally pay the absolute lowest amount of taxes allowable. To pay the lowest amount of taxes possible is your responsibility and not your tax preparer or CPA. Nobody will ever care more about your money than you do so think of this as your spring board to saving a fortune in income taxes over your lifetime. You will be amazed at how relatively simple it is to legally and dramatically reduce the amount of taxes you pay every year.
Let me say upfront that I am not a CPA or a tax attorney. I am just a tax payer like you that wanted to understand how I could get the tax system to work in my favor as much as possible. I have read countless books and listened to many live presentations from many experts on the subject of taxes. In these next couple articles I will be sharing information from a tax expert who has been teaching taxes all over the country to thousands of people for 20 years. He blew my mind when I saw him speak with all the great information he shared. We have become friends and had many business dealings together over several years. His name is Pat and he will be a huge asset for these taxation articles.
I am going to try to simplify some of the 70,000 pages of the tax code and supporting documents to help you capture more deductions and ultimately saving you $1,000’s of dollars on your taxes every year. A leading tax expert has graciously agreed to make one of his books available for FREE. Just go to www.wealthwithoutstocks.com to obtain the book. This book will show you little known secrets such as:
- Why people over-pay their taxes
- Two tax systems in America
- #1 Tax Strategy in America
- Profit Motive
- Business Trips VS Vacations
- Travel Rule Basics
- Ski Trips
- Meals & Entertainment
- Golf & Other Activities
- Dutch Treat
- Automobiles – Your KEY to a HUGE Deduction
- Motor homes & Yachts
- Medical Expenses
- Tax Deductible Gifts
- Insurance Premiums
- Deducting your Spouse & Kids
- Work Clothes
- New Business Start-Up Deductions
- Deductions for Employees W-2 Wage Earners
Obviously I can’t cover all of these topics in a couple of articles so I will just pick a few (5 to be exact) to give you an idea of what’s possible.
First we need to understand why People Over-Pay Their Taxes…
Most people over-pay their taxes for 3 reasons:
1) Fear of the IRS and being Audited. As long as you are following the laws in the Internal Revenue Code there is no need to fear an audit. The IRS just wants to make sure you are doing things right and following the laws.
2) Not keeping good records therefore missing out on deductions – Would you be willing to spend just a few minutes a day, (about an hour a month) to put $6,000 of your hard earned money back into your pocket? That would be a great use of your time. You have the ability to make that a reality but you will need the “know how” along with the desire.
3) Not knowing the rules – What’s deductible and what’s not. The follow up articles and free book will open your eyes to available tax deductions most people don’t even know about. Remember, to consult with your tax professional to make sure you qualify and are documenting your deductions correctly.
The U.S. Tax Code is very complex and confusing. No one, including any of the 100,000 or so IRS employees really understands it in its entirety.
TAXES – THE LARGEST SINGLE EXPENSE:
The average American pays about 30% of their gross income in taxes (Federal, State and Local), representing their single largest family expense. Taxes cost the average family more than housing and medical care combined.
Yet, few families ever realize the great expense that taxes cost them. While many people budget for food, clothing and other necessary expenses, they typically do nothing when it comes to planning to legally reduce their biggest expense: taxes!
We have all heard that middle class Americans pay the bulk of the taxes – there could be some truth to that. Let me explain. You see, for the average American wage-earner, a W2 employee, there are about a dozen tax deductions they are entitled to however if you are doing something in your life with the intent to make a profit on a regular and consistent basis, you can be entitled to 100’s of tax deductions.
Tune in next week for our next article to find out how to dramatically and legally reduce your income taxes!