During tax season, millions of Americans anxiously wait for W2’s, 1099’s, 1098’s and other documents needed to file income taxes. Some get excited about the lump sum refund owed to them but most professionals cringe at the thought of filing taxes. Usually praying to just break even and not owe the government any money.
The government does not give the middle class many tax breaks. Most tax credits have income limits. So climbing the corporate ladder and shooting for that six figure salary means paying more taxes. That is just the way American tax system works. However, there is a way to create credits regardless of income. Start a business. Having a small business that you run out of your home sets you up to write off expenses that normally would not qualify. Who gets the biggest tax breaks in America? Big business. Become a business.
Most cannot write off any of job related expenses paid for after taxes. For example, a $50,000 salary becomes $42,500 after taxes. That means all living expenses come from $42,500, not $50,000. Dry cleaning, meals, gas, car maintenance, utility bills, etc. Owning a business allows you to pay taxes on what’s left after paying expenses. What is deductible? Dry cleaning, meals, networking events, cell phones use for business, vehicle interest, car maintenance, mileage on your car used for business, business travel, the list could go on. Deducting all of those expenses before paying taxes and lowers the tax rate.
- Earn a $50,000 salary
- Bring Home $42,500 after taxes
- Live off of $42,500
- Owe more/break even after filing income taxes
How does owning a business help with income taxes? If you earned $5,000 from your business while working to earn a $50,000 salary, part of day-to-day expenses, now business expenses, are deductible. The cost to run your business is also deductible. For example, deduct $7000 in business expenses from total income of $50,000 plus $5,000. The taxable income is now $48,000 instead of $50,000. Since $50,000 is taxable income over the course of the year, a refund is in order when it reduces to $48,000.
With a Business
- Earn a $50,000 salary
- Earn $5,000 from your home based business
- $7,000 in living expenses are now business expenses
- Taxable income is now $48,000 instead of $50,000
Individual income tax and small business refunds will vary. This is just an example of how owning a small business can benefit you. Turn a marketable talent into a business. Start a direct sales business for an immediate solution. Filing income taxes does not have end with another bill.