Time to Find Tax Breaks . . . (Part I)
This is the first of a series of posts on tax breaks. Why? Because with all the deficits, new programs, and wealth sharing coming . . . taxes are going up.
One of the best ways to manage taxes is to have your own business. Why?
Because you can write things off, such as:
- Business use of your vehicle
- Travel and entertainment costs
- Utilities (electric, phone, internet, etc.) as they relate to business
- Magazines and newspapers related to business
- Part of your home as it relates to business
- Mailing and postage costs
- Employee benefits you provide yourself and employees (your spouses and kids can be employees)
You can reduce your taxable income by the business losses.
Setting up a business makes sense even for people who have full time jobs with employers. Moonlighting a second job is not as attractive as a moonlighting business.
Here's how to set up a business:
- Sole proprietorship-- the easiest way, you just start a business and file a Schedule C with your taxes (You may need to pay $10 for a business license at Town Hall)
- Partnership-- like a sole proprietorship but with a partner or partners
- Subchapter S Corp-- requires additional tax documents, but has corporate liability protections
- Limited Liability Corp. (LLC)-- requires additional tax documents, but has corporate liability protections
The above are known as "pass-thru" entities that go direct to the individual(s') tax returns
- "C" Corp.-- A separate legal entity from the owner(s) that has its own tax return
For most people, you can start as a sole proprietor switch to a S Corp or LLC and then switch to a C Corp when the time comes. I am simplifying here and HIGHLY recommend that you speak to an accounting and/or legal professional or do your own extensive research prior to pulling the trigger on the entity structure choice.
In the next part of this series of posts, I will discuss employee benefits that can get you tax breaks . . .
Here are my related posts,
Categories: Money Savers, Personal Finance, TAXES, Self Sufficiency
Tags: Money Savers Personal Finance Self Sufficiency Taxes
DDFD has hit a grand slam! This is great advice. I would only add two things:
1)You can turn your moonlight business into a full time effort and dump your crummy job. It's a great way to transition from slave to master of your destiny.
2)You can create something that is worth selling for a bundle in addition to making a bundle. That puts early retirement within reach for many people.
I am a big fan of starting your own enterprise. It is a good way to get out of the rat race and create wealth for you - not somebody else.
When you have your own business, your only boss is the customer - what a great feeling. It's the way it used to be for many, and the way it really should be.
If you're looking for financial security through work, it had better be work in support of your own interests in an enterprise. You're really only going to find a feeling of security with a business that you own and manage. The reason is simple; there is no such thing as security, there is only opportunity.
A website of mine, http://www.sensible-small-business-ideas.com is only in the startup stages, but it is still a good place to get a taste for what it takes to be in business for yourself. The site is dedicated to encouraging and helping people have their own enterprise.
The site has profiles of small business people and home based businesses as well. The people showcased there are just average people that have a vision, a talent and a desire to make money for themselves, not someone else.
When finished, the site will examine in detail nearly every aspect of running your own business. An enterprise of your own doesn't have to be hard, risky or expensive. Talent, enthusiasm, planning and tenacity are the keys to success.
Clair
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Clair,
You hit on something, ". . . your only boss is the customer . . . " I have often said it is for one boss to lay you off, but if you have many customers/bosses-- the odds are all your "bosses" won't lay you off at once. Logically, having your own business is safer and more secure than being a cog in the corporate machine . . . and remember, you get serious tax advantages.
DDFD
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