You and I are taxed at every turn. Many taxes we pay are disguised as a fee.
Your auto license and registration, toll booths, hunting and fishing license, cosmetology, insurance, and medical license's, building permits, and the list goes on.
And what about your recreational vehicles? Taxed when you buy, and taxed when you use them.
Even your children's bicycle is taxed twice. Once when you buy it and then again when you license it.
It's not just federal tax; you also have state, county, city, stadium tax, tourism tax, personal tax, social security tax and property tax. Are you feeling over taxed yet?
Believe me; I could go on for several more paragraphs just outlining all the ways we are taxed.
OK, just a couple more. What about your car, you paid tax on it when you bought. And pay taxes when you license it, next time you put gas in your car, look at the pump.
You will see a sticker explaining the break down of state and federal fuel tax you are paying.
Are you tired of high gasoline prices? 25% of what you are currently spending for fuel is tax.
Conservatively speaking, 50% of your gross income goes to some type of tax.
This is why it is so important that you take every legal, honest, and ethical deduction you have coming.
You have more tax deductions as a home-business owner than the super rich, but it's your responsibility to understand them.
By the way, you may recall, Dr Stanley and Dr. Danko, authors of the best selling book, The Millionaire Next Door, found that one of the five key strategies that of all the self-made millionaires had in common was they plug the tax holes.
You need to plug your tax holes!
What is deductible as a home-business owner?
Here are a couple of my favorites.
1. Your home office.
You can deduct all the expenses related to your home, equal to the percentage of square feet your office takes up. This also applies to renters.
2. Deduct your travel. Airfares, taxies, hotels, dry cleaning, tips, tolls. Extras like renting a cell phone, computer, or car rental.
3. Meals, hey you have to eat any way. Why not do it so you can deduct them?
4. Your automobile. Not just one car or truck, all the vehicles you own.
There are two ways to take this deduction.
The IRS allows you to track actual expenses, or to use the alternative, which is based on total business miles driven. This is a BIG deduction! $0.441/2 per mile for 2006.
5. Entertainment, things like season tickets, golfing, fishing, movies, HOME MEETINGS. And the list just keeps going.
6. Capitol expense deductions. This is for things like a new laptop, software, furniture. You can fully deduct over $100,000 this year. In the past you would have to depreciate the expense over the IRS's estimated life of the item purchased. That could take up to 20 years.
7. You can set up and fund your own retirement plan. It's called a SEP (Self Employed Pension).
You can stash up to 25% of you net earning tax deferred.
8. Your health insurance premiums for self, spouse and dependents are fully deductible.
9. Credit Card interest is deductible for your business. It is not for you personally. Make sure that if you are carrying a credit card balance, you carry it on the business side.
10. Income Shifting. Hire your kids; pay them a fair wage for a job they can perform. Such as answering the phone, cleaning the house, cutting the grass, working your function or trade show, filing, word processing. By hiring your kids, they earn tax free, you get to deduct it, and they can the buy there designer! clothes, class rings, prom dresses and tuxes, even college e can be deducted this way. Your child must be at least 7 years old, and you must document what work they do, and pay them by check.
So what do you have to do to qualify for all of these lucrative deductions?
First the IRS is a stickler for documentation, and you must keep your records DAILY!
Second, you must be in pursuit of a profit in your business. Now I didn't say you have to make a profit, simply pursue a profit.
Third, you must show regular activity. Make sure you participate in your company auto-ship program, be on your company and team leader training calls, and be sure to document it in your planner.
That's all the IRS requires.
Just a couple of thoughts, most people are afraid to use the tax code properly to keep their hard earned money in their pocket rather than over paying the IRS.
Let me ask you a question, who could make better use of your MONEY? You or the IRS?
You know the best part? You don't have to wait until April 15th to get your money back. If you or your spouse work a regular J.O.B. You can amend your W-4 to reflect your home business and get an immediate raise in your take home pay. Your home business is equal to having four children that you don't have to feed, dress, educate, or drive them around.
Increase you exemptions by 4. If you earn $30,000 per year, your take home will increase $300/month as long as you are actively building your business.
$50,000 per year and your take home will increase by $500 every month. $100,000 per year and you will have increased your net pay by $12,000 per year.
Understanding the tax code as it applies to you is paramount. Your tax preparer, unless they are involved in a home business themselves, will not know how to guide you.
Educate yourself first. It is worth it.
Not only as a HUGE money saver, but also as a great recruiting tool.
It allows you to recruit up.
Taxes affect everyone. They really affect the high income earners that we want in our business, but haven't felt comfortable approaching with our typical approach.
Now all you have to do is ask them if they think they pay to little in taxes or too much.
When they say too much, you say, if I can show you how to keep more of your hard earned money in your pocket, would you want to know about it?
My goal in writing this is to help you see your business through another set of eyes.
Build it BIG!
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