"Putting Tax Deductions to work to Dramatically Lower Your Taxes" or "Tilting the tax laws in your
Own your own business and shift the taxing structure to your advantage. Here are some deductions that are available to you as a business owner.
But first, a question: At any point in your life, did your accountant make it a point to do a comprehensive review of the tax deductions that can work for you. If you are like most people, the answer is probably no.
That’s not meant as a slam against accountants. Its simply a wake up call to the fact that most accountants and C.P.A.’s are not income tax preparers, not income tax planners. They may do a fine job of preparing some tax returns but the information that they are learning is simply outside the scope of most tax services.
Now, let’s take some time to highlight a few of the more powerful, yet lesser-known, deductions that are available.
“The Golden Tax Secrets”. They are:
1) Achievement Awards Sec. 74: Each year, your company can give away to its employees three separate awards. Each of these awards is worth $1,600 per year in kind. That means that you can’t write the employee a check for $1,600, but rather, you can present him or her a gift. Examples include ski equipment, a plasma T.V., golf clubs, cookware, etc.. You get the idea. The gift can really be anything other than cash.
The first gift is for longevity. This is reserved to companies in existence for five years or more. You can present the gift to your longest standing employee and if you are the ONLY employee of the company then this would definitely be YOU.
The second gift is for safety. This gift is typically reserved for companies in a risky business like construction or a factory. I suppose rehabbing real estate would qualify.
The third gift is for sales excellence. You can award your best salesperson this award based on their outstanding performance during the previous year.
2) Your Annual Corporate meeting. The law requires you to update your formal corporate documents each year. This includes keeping accurate financial records, corporate resolutions and minutes, etc.. So, as the owner of your business, you can combine your annual meeting with a vacation; kill two birds with one stone and make the entire trip deductible. And, you can bring your family too.
3) Your Corporate Gym Sec. 132 (h). Unfortunately, the IRS won’t let you directly deduct the cost of your gym membership. However, under this code section, you can deduct the cost of the Gym equipment. So that Nautilus set, your Bow Flex machine, even the Gazelle Trainer that you’ve seen on television – not to mention free weights, a work out bench, etc – are all tax deductible through your company.
4) Business Gifts. Your company can give gifts to individuals of up to $25.00 per year. Often, these gifts are given as year–end or holiday baskets with assorted goodies. But a little known nuance is that your company’s gifts to other companies are unlimited. So, I suppose your company could give a corporate gym membership away to your friend’s company and I can’t see any reason for your friend’s company being able to provide a corporate gym membership to your company in return.
5) Meals and Lodging – Sec. 119. Your company can cover the costs of meals and hotel expense required for overnight stays. These trips might involve researching new products, better sources of supplies, new real estate deals, etc.
6) Put Your Kids on the Payroll. Instead of paying your kids an allowance, hire your kids and put them to work. They’ll learn first hand the importance of having their own business, and their salary is fully tax deductible.
7) Seminars – Sec.162 Your company can pay for the cost of educational seminars, even if they have nothing to do with your current business. So, for example, if you want to learn how to invest in foreclosures, your company can pay the freight. What about things like golf lessons, ski lessons, dance lessons or sky diving? These can all be included.
8) Dependant Care Plan Sec. 129. The code allows you to deduct up to $5,250 for the costs associated with caring for dependants This includes young children and our adult parents who, nowadays, often have to turn to us for help.
9) Moving Expenses. Your company can pay the cost of an executive move, whether it is across town or across the country.
10) Your Retirement Plan. Your company can establish its own retirement plan. It can include you, your spouse and even your kids. There are MANY different types of retirement plans to choose from. A retirement specialist can help you choose the best types of plans for you and your family. Imagine hiring your child, grandchild, or niece/nephew to work for your business and paying them a tax deductible salary which they place into a tax deductible retirement fund from the time they are age 7. You might also want to self-direct that plan into your favorite investments. Just imagine the financial head start that would give them.
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