Seven Proven Steps
Does it seem like the rich know a secret that others don't? They do! They have learned that the secrets of wealth come from thinking differently about wealth creation. They have to take all of the tax-advantages available to them. We call these the Seven Proven Steps. They are:
- Create a Business.
- Discover Your Hidden Business Deductions.
- Pay Your Taxes.
- What's Left Goes Into Real Estate.
- Real Estate Income Comes Out Tax-Free.
- Buy a House the Right Way.
- Make Your House Give You Money.
In this month's edition, we'll review what it means to create a business and the key points to setting it up for the tax loopholes.
Create a Business
As a CPA, I see a lot of financial statements and tax returns of other people. One thing is very clear. An employee, no matter how much money he makes, has very limited tax-planning opportunities. And, taxes are the #1 expense for most Americans. In fact, as an employee's income increases, he will lose the ability to write-off deductions such as mortgage interest, property tax, charitable donations and the like. And, if he makes enough money, he'll also lose the exemptions for his dependents and himself.
But, the business owner can actually control when he pays his taxes and how much he pays in taxes. When you have a business, it is also possible to take deductions for items that were previously personal expenses. We call those the "hidden business deductions." That's the second step of the Seven Proven Steps.
What is a Business?
You might be able to start your business simply by having your employer change your status from an employee to an independent contractor. Or, you might be able to begin a business by taking your hobby up a notch. Or, you might start a part-time business on the weekends.
Before you can start taking all of the deductions available through having your own business, you must first prove that your business is really a business. If the IRS decides that your business is just a glorified hobby, then you will not be able to offset any loss from the business against your other income. In the beginning, most new businesses lose money. In fact, the average business will lose money for the first three years. You will want to make sure you can take advantage of those losses by offsetting them against your other income. If you have more loss than other income, you can roll this loss forward into the future until you start making money. This is referred to as a net operating loss.
The IRS is looking at Nine Factors to determine if you really have a business. These Nine Factors are:
- You carry on the activity in a businesslike manner;
- The time and effort you put into the activity indicate you intend to make it profitable;
- You depend on income from the activity for your livelihood;
- Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business);
- You change your methods of operation in an attempt to improve
profitability; - You, or your advisors, have the knowledge needed to carry on the activity as a successful business;
- You were successful in making a profit in similar activities in the past;
- The activity makes a profit in some years, and how much profit it makes; and
- You can expect to make a future profit from the appreciation of the assets used in the activity.
My book, Loopholes of the Rich – How the Rich Legally Make More Money and Pay Less Tax, has a questionnaire you can use to ensure that you will pass this test if you are ever questioned.
One of my clients used to be employed making $50,000 per year. He was able to change his status to that of an Independent Contractor. At the end of the year, he had a very pleasant surprise when he discovered that he actually had $10,000 more in spending cash because of the change. That is even though he made exactly the same amount of money. Creating a business had given him more cash through the use of additional write-offs for items that he already was spending money on.
If you are considering this type of change, remember that you need to factor in the cost of benefits that you might be giving up.
Business Structure
But, you can't simply declare, "I'm in business" and then wait for all the tax savings to come rolling in the door. In fact, if you set your business up wrong, you could end up paying even more in taxes than you did before. If you are self-employed, and operating as a Sole Proprietor (Schedule C) business you will have to pay self-employment tax in the amount of 15.3% on top of your normal federal and state income tax. The same is true if you are operating in the form of a Limited Liability Company (LLC) and are being taxed as either a Sole Proprietorship or a Partnership. (The LLC can elect how it wishes to be taxed, depending on applicable state law.)
Unfortunately, it's not a simple answer to determine the correct business structure. There is no "one size fits all" answer. You need to take into account the amount and type of business income, income that you have from other sources, how you will fund the business, what you intend to do with the monthly cash flow from the business and what your exit strategy is. After you know these factors, it's time to talk to a qualified tax advisor to determine the best structure for your state and circumstances.
The Next Step
After you have your business set up in the correct structure, it's time to look for those hidden business deductions. That's the topic for next month's edition of Healthy Wealthy nWise.
Diane Kennedy is a CPA/Tax Strategist and the author of the best-selling book Loopholes of the Rich: How the Rich Legally Make More Money and Pay Less Tax and co-author of the best-selling book
Real Estate Loopholes: Secrets of Successful Real Estate Investing. For more information on how to legally use the tax loopholes and make the IRS your partner, contact Diane's CPA firm, DKA, at 888-592-4769 or www.dkacpa.com. Tax law is constantly changing! Keep up to date for free by signing up for a free e-newsletter at www.taxloopholes.com
free viagra samples before buying [url=https://viagenupi.com/#]when will generic viagra be available[/url] viagra online when will generic
viagra be available is viagra covered by insurance https://viagenupi.com/
chloroquine malaria prophylaxis https://chloroquine1st.com/
hydroxychloroquine coupon https://hydroxychloroquine1st.com/
can you buy hydroxychloroquine over the counter https://azhydroxychloroquine.com/
keflex walmart https://keflex.webbfenix.com/
bimatoprost ophthalmic solution 0.01% generic https://www.jueriy.com/
how long does cialis last https://www.wisig.org/
Hiya! Quick question that’s completely off
topic. Do you know how to make your site mobile friendly?
My weblog looks weird when browsing from my apple iphone. I’m trying to find a template or plugin that might
be able to correct this issue. If you have any recommendations, please share.
Cheers!
Hey! Do you use Twitter? I’d like to follow you if that
would be ok. I’m absolutely enjoying your blog and look
forward to new posts.
Hi there I am so thrilled I found your web site, I really found you by error,
while I was looking on Google for something else, Regardless I am here now and would just like to say cheers for a marvelous post
and a all round thrilling blog (I also love the theme/design), I don’t have time to browse it all at the minute but I have book-marked
it and also added your RSS feeds, so when I have time I will be back to read a great
deal more, Please do keep up the great work.
Hey! Quick question that’s entirely off topic. Do you know how
to make your site mobile friendly? My website looks weird when viewing from my iphone.
I’m trying to find a theme or plugin that might be able to resolve this issue.
If you have any recommendations, please share. Thanks!
I just couldn’t depart your website before suggesting that I extremely enjoyed the usual info a person provide in your
guests? Is going to be back ceaselessly to check out new posts
best erectile dysfunction pills https://viatribuy.com/
Great info. Lucky me I ran across your site by accident (stumbleupon).
I’ve bookmarked it for later!
I’ve been exploring for a bit for any high-quality articles or weblog posts in this sort of space .
Exploring in Yahoo I eventually stumbled upon this site.
Studying this information So i am satisfied to exhibit that I’ve an incredibly excellent uncanny feeling I discovered
exactly what I needed. I so much unquestionably will make certain to do not forget this web site and provides it a look regularly.
WOW just what I was searching for. Came here by searching for airfare
At this time it appears like Expression Engine is the top
blogging platform out there right now. (from what
I’ve read) Is that what you’re using on your blog?
adreamoftrains web host
I was suggested this blog by my cousin. I’m not sure whether this post is written by him as no one else know such detailed about my
difficulty. You are incredible! Thanks!
Your way of describing everything in this post is genuinely good,
all can simply know it, Thanks a lot.
generic alternatives to januvia http://lm360.us/
cialis online no prescription http://cialisoni.com/
buy hydroxychloroquine https://webbfenix.com/
buy careprost https://carepro1st.com/
Wonderful work! That is the type of information that should be shared across the
web. Disgrace on Google for not positioning this put up higher!
Come on over and talk over with my site . Thank you =)
It’s remarkable to go to see this site and reading the views of
all mates on the topic of this paragraph, while I am also eager of
getting know-how.
It’s awesome to pay a quick visit this web site and reading the
views of all friends about this piece of writing, while I am also eager of getting familiarity.
I was wondering if you ever considered changing the page layout of your website? Its very well written; I love what youve got to say. But maybe you could a little more in the way of content so people could connect with it파워볼사이트
better. Youve got an awful lot of text for only having 1 or 2 images. Maybe you could space it out better?
Uihwb24 ryrgzy cialis generic online. asthma advair side effects all stds list.
viagra jelly online need viagra today viagra in toronto
dove comprare viagra genericoIbmvcqer qiu31a sildenafil citrate. how to write agent orange claim for heart disease what is a physicians.
viagra cadeiranteExlj81a emxhrn viagra without a doctor prescription. golden palace restaurant grade health department downey why i am not getting better with arthritis.
Hello my loved one! I want to say that this post is awesome, nice written and include approximately all vital infos. I’d like to look extra posts like this .|
Ekonfgm online pharmacies florida department of health
This design is incredible! You obviously know how to keep a reader entertained. Between your wit and your videos, I was almost moved to start my own blog (well, almost…HaHa!) Wonderful job. I really loved what you had to say, and more than that, how you presented it. Too cool!|
Hey! This is my first comment here so I just wanted to give a quick shout out and say I really enjoy reading through your articles. Can you suggest any other blogs/websites/forums that cover the same topics? Appreciate it!|
Hi there, I log on to your blogs on a regular basis. Your writing style is awesome, keep up the good work!|
mn health department nursing home survey results are routine checkups and vaccines covered by pet health insurance. cialis reviews Uejrf33 srfuey cialis tadalafil 5mg
Regards. Plenty of tips., online pharmacy Ydbeltrb.
http://canadianvolk.com
Yhmsagg online pharmacies how can i got my treatment from the state mental health in arkansas as a minor
Ozgfa37 online pharmacies omron blood pressure cuff replacement
http://canadianvolk.com
Excellent material. Many thanks!, buy cialis Uauja08.
Thanks for every other magnificent post. Where else may just anybody get that type of information in such a perfect approach of writing? I’ve a presentation next week, and I’m at the search for such info.
Fantastic site you have here but I was wanting to know if you knew of any forums that cover the same topics talked about here? I’d really love to be a part of online community where I can get responses from other experienced people that share the same interest. If you have any recommendations, please let me know. Thanks!|
http://bambulapharmacy.com
I do not even know how I ended up here, but I thought this post was good. I don’t know who you are but certainly you’re going to a famous blogger if you are not already 😉 Cheers!
best drugstore setting spray canada drug pharmacy impotence
https://levitraye.com
my canadian pharmacy cheapest pharmacy online pharmacy canada
24 hour drug store near me canadian pharcharmy mail order pharmacy
drugstore cowboy best drugstore bronzer indian pharmacy
cheapest pharmacy http://pharmacy-onlineasxs.com/ best drugstore eyeshadow
http://bambulapharmacy.com
pharmacy orlando pharmacy prices dysfunction
best ed pills us online pharmacy pharmacy coupons
https://vardenafilz.com
You are a very intelligent person!
global pharmacy canada cheap viagra online canadian pharmacy canadian pharmacy online
You reported this exceptionally well! viagra
http://sansordonnancefr.com – viagra sans ordonnance
My family members all the time say that I am wasting my time here at net, except I know I am getting familiarity daily by reading thes good articles or reviews.|
what did trump say about his healthcare plan viagra
http://withoutscript.com – reacciones uso viagra
Cheers! Awesome stuff! cialis
std no symptoms discount viagra pills
It is perfect time to make a few plans for the future and it’s time to be happy. I’ve read this publish and if I may just I desire to recommend you some interesting issues or suggestions. Perhaps you can write subsequent articles regarding this article. I want to read even more issues about it!
Youre so cool! I dont suppose Ive read anything like this before. So good to search out any individual with some original thoughts on this subject. realy thank you for starting this up. this web site is something that is wanted on the web, somebody with a little bit originality. useful job for bringing something new to the web!
https://tadalafilrembo.com – does alcohol affect cialis
http://canadianvolk.com
https://viaprescription.com/
https://viaprescription.com/
http://bambulapharmacy.com
Thank you for any other informative site. Where else may just I get that type of info written in such an ideal way? I’ve a project that I’m just now operating on, and I have been on the look out for such info.
https://cialiswlmrt.com – cialis ohne rezept spanien