It’s not what you earn, it’s what you get to keep.
My 10 favorite tax hacks for business owners: (View Tweet)
Note: ax tips
1 - Donor Advised Funds
Give appreciated stock to charity or a fund instead of cash.
You get a double dip - a deduction for the full value of the stock while never recognizing the gain.
If you love the stock buy it back with a higher basis. (View Tweet)
2 - QBI optimization
High earners save tens of thousands getting this right.
The qualified business income is limited by wages - add back all wages paid and multiply net income by 2/7
This is what total wages of the business should be to optimize (View Tweet)
3 - “The Augusta Rule”
Rent your home out 14 days tax free.
You are able to exclude the income and not report it on your personal return. (View Tweet)
4 - S-Corps
Save employment taxes by setting up your consulting business as an S-Corp.
At the lower end you get to decide a fair wage to pay yourself and save social security taxes.
High earners can optimize QBI and cap Medicare tax (3.8%) on their earnings. (View Tweet)
5 - Bonus Depreciation - AKA the 8th wonder of the world
Business owners can use bonus to save. I have written about this with real estate, but it also works with other assets.
Buy a 6000lb truck on the last day of the year with 1K down and write the whole thing off. (View Tweet)
6 - Mega Backdoor ROTH
Self employed business owners can get up to 60k a year into a Roth IRA
Great opportunity if you make less than 400k and you are a big saver. (View Tweet)
7 - Give Yourself Tax Credits
ERC, R&D, 45L oh my!
These credits can be available to business owners in the 100s of 1000s without them even knowing!
Several sprang from covid and others have been in place for decades.
It’s worth learning whether these are available to you. (View Tweet)
8 - Fringe Benefits
Use credit cards for business expenses, earn points for personal travel, pay no tax. What a deal!
The best tax benefit of business ownership is getting your normal life’s expenses covered under your business tax free. (View Tweet)
9 - SALT Cap Workarounds
When TCJA was passed the state tax deduction become limited to 10k
Several states have implemented workarounds and strategies so your pass through business can pay and deduct state taxes.
This can provide tens of thousands of federal tax savings. (View Tweet)
10 - Real Planning and Good Advice
There is no substitute. As your business becomes larger and more complex you ought to spend more thought on tax strategy.
This becomes a catch all for thousands of different ideas and opportunities that can have massive payoff ratios. (View Tweet)
As you consider any tax strategy always keep Return on Hassle at the top of mind.
You should have the simplest plan that can save you the most, and only add abstraction if the savings are worth it. (View Tweet)
If you found this thread helpful please go back to the first tweet and like/share it.
Also follow me @baldridgecpa for more tax and finance insights. https://t.co/pi8KA71iC1 (View Tweet)
