Taxes will be the biggest expense in your life so strategic tax planning is a must.
Tax code is 75,000 pages and the wealthy use every page of it to legally avoid taxes. And you should too.
Here are 7 tax tips to save you thousands:
Tax code is 75,000 pages and the wealthy use every page of it to legally avoid taxes. And you should too.
Here are 7 tax tips to save you thousands:
1. Agusta Rule (Section 280A):
Allows you to rent out your home for up to 14 days per year without having to pay tax on rental income.
You can host a team retreat, party, event or meeting at your home, and rent it out to your own business.
Example:
You can rent for $500 a night, and have your corporation pay $7,000 for the βuseβ. Thatβs a $7,000 deduction to your business and you pay no tax on the money.
This not only reduces your taxable income but also offers tax-free income from rent.
Allows you to rent out your home for up to 14 days per year without having to pay tax on rental income.
You can host a team retreat, party, event or meeting at your home, and rent it out to your own business.
Example:
You can rent for $500 a night, and have your corporation pay $7,000 for the βuseβ. Thatβs a $7,000 deduction to your business and you pay no tax on the money.
This not only reduces your taxable income but also offers tax-free income from rent.
2. S Corps:
An S Corp can help you reduce self-employment taxes.
It allows business owners to take a reasonable salary from the company's profits, so the 15.3% self-employment tax is minimized.
Example:
Assume you are the sole shareholder of an S corp and you earn $100,000 in income.
If you take a salary of $50,000 and distributions of $50,000, you'll only pay payroll taxes on the $50,000 salary.
This could save you thousands.
An S Corp can help you reduce self-employment taxes.
It allows business owners to take a reasonable salary from the company's profits, so the 15.3% self-employment tax is minimized.
Example:
Assume you are the sole shareholder of an S corp and you earn $100,000 in income.
If you take a salary of $50,000 and distributions of $50,000, you'll only pay payroll taxes on the $50,000 salary.
This could save you thousands.
3. Hiring Your Children:
If you own a business and have kids under 18, you can pay them $13,850 tax-free, plus deduct it from your taxable income.
When you hire your child, it's a business expense and you can deduct it from your taxable income, lowering your tax liability.
They can perform tasks such as admin work, social media management, or other age-appropriate tasks.
Your child will owe $0 taxes and you legally avoided tax on $13,850.
They can invest $7,000 of it in a tax-free ROTH IRA.
If you own a business and have kids under 18, you can pay them $13,850 tax-free, plus deduct it from your taxable income.
When you hire your child, it's a business expense and you can deduct it from your taxable income, lowering your tax liability.
They can perform tasks such as admin work, social media management, or other age-appropriate tasks.
Your child will owe $0 taxes and you legally avoided tax on $13,850.
They can invest $7,000 of it in a tax-free ROTH IRA.
4. Section 179 Tax Deduction:
The IRS Section 179 Tax Deduction allows business owners to write off the entire cost of a vehicle used for work (cars, trucks, SUVs, vans, etc.)
For tax years beginning in 2022, the maximum Section 179 expense deduction is $1,080,000.
The IRS Section 179 Tax Deduction allows business owners to write off the entire cost of a vehicle used for work (cars, trucks, SUVs, vans, etc.)
For tax years beginning in 2022, the maximum Section 179 expense deduction is $1,080,000.
5. Business Expenses:
Business owners can claim many deductions that salaried employees cannot, such as:
β’ Travel
β’ Supplies
β’ Advertising
β’ Vehicle expenses
β’ Home office costs
β’ Internet & phone bills
β’ Health insurance premiums
β’ Education & professional development
Business owners can claim many deductions that salaried employees cannot, such as:
β’ Travel
β’ Supplies
β’ Advertising
β’ Vehicle expenses
β’ Home office costs
β’ Internet & phone bills
β’ Health insurance premiums
β’ Education & professional development
6. Primary Residence Exclusion (Section 121):
Homeowners can exclude $250,000 of capital gains from the sale of their home ($500,000 if married).
If you sell your primary residence for a profit, you don't pay taxes on the gain, up to these amounts.
Homeowners can exclude $250,000 of capital gains from the sale of their home ($500,000 if married).
If you sell your primary residence for a profit, you don't pay taxes on the gain, up to these amounts.
Pay your legal share of taxes, and not a dollar more.
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β’ RT the FIRST tweet to share itπ
β’ Follow me @FluentInFinance for daily tips
β’ Sign-up for my newsletter to master your money: TheMoneyNewsletter.com!
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