Why Own a Small Business Part 1 of 4
I enjoy sharing the benefits of a home based business with all my clients because of the tax benefits that are too enormous to ignore.
As a business owner, you are entitled to deduct a much broader range of items than you did as an individual taxpayer. Business tax deductions, created by the Internal Revenue Service (IRS), enable you to deduct the cost of items that would otherwise not be tax deductible to you as an individual taxpayer, including the following:
· Your home
· Your car
· Your equipment
· Your travel and entertainment
· Your family and yourself
· Your strategic issues
· Your retirement
These business-related expenses can generate a substantial dollar amount of tax deductions for you each and every tax year.
Let’s assume that for a given tax year the preceding items generated tax deductions totaling $90,000 (a very conservative number, given the potential tax deductions available to you as a business owner). This $90,000 in tax deductions generates just over $25,000 in tax savings ($90,000 x 28%). If the tax rate applicable to your business profit is 39 percent, the applicable tax savings would be just over $35,000 ($90,000 x 39%).
You can now ask yourself:
“Is there something I would like to do with this $25,000 to $35,000 in additional cash?”
“Would I like to spend more money on my family?”
“Maybe I would prefer to save more for my family’s future, your children’s college education, and for my retirement.”
Whatever use you put these additional dollars to, it would certainly be far better than paying that money to the IRS.
I hope you enjoyed this savings example and gets you to thinking about opening a small business.
Your small business does not have to be a brick and mortar business. In fact, unless you have a tremendous amount of cash or credit available, I would recommend a home based business.
The great news is even if you start your home based business part time, these tax deductions still apply.
In 2 – 4 we will look closer as to the tax deduction the IRS code will allow.
All The Best,
Disclaimer: Always verify with your tax adviser and current federal tax law before making any tax decisions.