Secrets of the Rich
In the past two issues, we have covered the Seven Proven Steps that the rich use to make and grow their money. In the first edition, we covered the overview of the system and debuted the seven steps:
- 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.
Last month we discussed how simple it is to have a business in the IRS's eyes. This is a critical first step. Don't skip it! You must have a legitimate business in order to take advantage of the steps shown in this edition.
Discover Your Hidden Business Deductions
My firm, DKA, encourages our clients to look for "hidden business deductions" from their personal expenses. Don't go buy something just for the tax deduction! I've heard people say, "I'm going to buy this new equipment because I'll get a tax deduction." But, when asked, they admit they really don't want or need the equipment. They are just looking for the tax break. That's an example of looking for cents but forgetting common sense. You don't want to spend a dollar when you'll just get 40 cents back (assuming 40% federal and state blended tax rate). That means you're losing money. If you don't want what it is you're buying, don't buy it just for the tax deduction! Our philosophy is to instead look for what you are already spending money on. What can you turn into a legitimate business expense?
What Qualifies as a Business Deduction?
First, let's review what the IRS considers to be a business expense: Internal Revenue Code Section 162(a). This Code section says, in just 27 words, what you can deduct for your business:
"There shall be allowed as a deduction, all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business."
We know what a business is from Step One in last month's edition, but what does it mean to be an "ordinary" or "necessary" expense? These two words are further defined by the IRS as:
Ordinary Expenses: Expenses that are normal, common, and accepted under the circumstances by the business community.
Necessary Expenses: Expenses that are appropriate and helpful.
That pretty much leaves the door wide open! Anything can be a deduction, in the right circumstances. Keep good track of your deductions and then make sure you review the information with your tax preparer. The following three most missed business deductions are excerpted from Loopholes of the Rich – How the Rich Legally Make More Money and Pay Less Tax. Note that this is just a small amount of what could be legitimately deducted from your business income. In fact, I list over 300 possible business deductions in Loopholes of the Rich!
Commonly Overlooked Business Deductions
Following are the business deductions common to almost all business. Take the time to review the list and make a note of ones that might be applicable to your business.
- Auto Expense
-
There are many ways to deduct the cost of an auto. And, that can be confusing.
- You can buy the car in your business. The business can deduct the cost of maintaining the car (gas, oil, repairs, tires, car washes, etc.). Plus, the business can deduct the interest portion of any payments and then depreciate the car, using the limits established by the government.
- Your business can lease the car. A "luxury automobile," (defined as anything worth more than $15,500), will have a small amount that will not be able to be deducted. For example, a vehicle worth $31,500 will have to have $260 of the lease added back in the first year.
- You can buy or lease the car yourself, and be reimbursed for mileage at the current rate. In 2003, the amount is $0.36 per mile. The payment is deducted from the business income, but is not considered income for you.
- If you buy a vehicle that is over 6000 GVW (Gross Vehicle Weight), the "luxury" automobile limitation does not apply. In this case, your business can depreciate the vehicle just like it was any other piece of capital equipment. That includes being able to make a Section 179 deduction of $100,000 (!) right up front.
- Bad Debt
Bad debt is a commonly misunderstood deduction. It is most overlooked at the personal level, though, and not at a business level. An individual can write off loans made to someone that have no hope of collection. An individual can also take a deduction for debt or expenses paid on behalf of others that will not be repaid. The burden of proof will be on whether the item is actually a gift. To prove a bad debt, you must attempt to collect just as you would with any other debt. I recommend that my clients first have a note drawn up for all loans and then show proof of collection attempt by sending a certified letter demanding payment.
Where most people will overlook the bad debt expense at an individual level, they will mistakenly try to take a bad debt expense deduction for a business when it is not allowed. The only way that a business can take a bad debt expense is if the income was first reported and tax was paid on it. In other words, if your business is "accrual" based, which means that accounts receivable are counted as income even if they have not been collected, then when that receivable is not collected, there is a bad debt expense. Most small businesses, however, are "cash" based, which means that income is only counted when it is received. There cannot be a bad debt expense offsetting income, because the accounts receivable income was never recognized.
- Business Start Up
There are many expenses BEFORE you begin your business. And, unfortunately, since one of the steps is setting up your accounting system, and the expenses occur first, you might forget them. Here is a checklist of some common start up expenses that you can deduct (or capitalize and deduct over 60 months). It is not complete. Use it as a memory jog for items you can deduct in your business.
- Legal expenses (will need to be amortized over 60 months). These are costs that you pay to an attorney or document preparation service to prepare the initial paperwork for your business. After the business is going, most legal fees are deductible immediately.
- Business structure set-up (cost of incorporation, etc. – amortized over 60 months). This includes the costs you pay to have special business structures set up – such as the cost of forming a corporation.
- Filing fees. These are the costs paid to the state and local agencies for the privilege of doing business and include business licenses, state filing fees, fees for lists of directors and others. The exact fees will depend on the type and location of your business.
- Accounting Fees. Hopefully, you will consult with an accountant and bookkeeper to get your books set up as soon as possible. Those costs are deductible.
- Office Equipment. There is a lot of office equipment needed for a basic office in this electronic age. Computer, printer, fax machine, phone – these are just a few of the items needed. Many people already have some of these items before starting a business. Your business can pay you the fair market value for these items from its proceeds, but you need to track the expenses first.
- Office Furniture. Office furniture can include your desk, tables, chairs, and filing cabinets, as well as art you hang on the walls.
- Cost of Investigating Business (seminars, books, travel, advisors' fees). A prudent business owner takes time to investigate and learn all they can about their business first. This can include going to seminars, buying books, subscribing to magazines, dues to professional organizations, travel to look at other businesses, and talk to advisors.
- Office set-up costs (stationery, business cards, logo design). The cost of designing a logo, setting up a web site, preparing stationery, etc., are all part of the office set-up costs.
These are just three of the over 300 business deductions that we've discovered for our clients. For a complete list, see Loopholes of the Rich.
In the next edition, we'll discuss "pay your taxes" and strategies you can use to control how and when you pay your taxes.
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
I think the admin of this website is in fact working hard in support
of his web page, as here every information is quality based information. Billige
Keylor Navas Trøjer Salg
I all the time used to read paragraph in news papers but now as I am a user of web
thus from now I am using net for articles, thanks to web.
Hi there, of course this piece of writing is in fact nice and I have learned lot of things from it on the topic of blogging.
thanks.
Howdy just wanted to give you a quick heads up. The
text in your post seem to be running off the screen in Chrome.
I’m not sure if this is a format issue or something to
do with internet browser compatibility but I thought I’d post to let you know.
The style and design look great though! Hope you get the problem resolved soon. Cheers
My spouse and I stumbled over here from a different page and thought I may as well check things out.
I like what I see so now i am following you. Look forward to looking at your web
page yet again.
This is a topic which is close to my heart… Thank you!
Exactly where are your contact details though?
What i don’t realize is in truth how you are
not actually much more neatly-favored than you may be right now.
You are very intelligent. You realize thus significantly in terms of this
matter, produced me in my opinion consider it from numerous
varied angles. Its like women and men are not involved unless
it is something to accomplish with Girl gaga!
Your personal stuffs great. All the time care for it up!
It’s an remarkable piece of writing designed for all the internet visitors; they will
obtain advantage from it I am sure.
It’s awesome to pay a quick visit this web page and reading the views
of all mates concerning this post, while I am also eager of getting familiarity.
This is a topic that’s near to my heart…
Many thanks! Exactly where are your contact details though?
Pretty great post. I just stumbled upon your blog and wished to
mention that I have truly enjoyed surfing around your weblog posts.
After all I will be subscribing on your feed and I’m hoping you write once more soon!
Wonderful website. Lots of useful information here. I am sending it to several friends ans also sharing in delicious.
And of course, thanks in your effort!
I like reading an article that will make men and women think.
Also, thank you for allowing for me to comment!
This is really interesting, You are a very skilled blogger.
I’ve joined your feed and look forward to seeking more of your wonderful post.
Also, I have shared your website in my social networks!
For most up-to-date information you have to visit world wide web and on world-wide-web
I found this web site as a finest site for hottest
updates.
It’s appropriate time to make a few plans for the long run and it
is time to be happy. I have read this post and if I
could I desire to recommend you few fascinating issues or suggestions.
Perhaps you could write subsequent articles relating to this article.
I wish to learn even more things approximately it!
Good respond in return of this question with genuine arguments and describing
everything regarding that.
I got this web page from my friend who told me on the topic
of this web page and now this time I am visiting this
web site and reading very informative posts at this time.
It’s amazing for me to have a web site, which is good for my
experience. thanks admin
It’s really a great and helpful piece of info.
I’m glad that you simply shared this useful information with us.
Please stay us up to date like this. Thanks for sharing.
Hey there! Do you use Twitter? I’d like to follow you if that would be ok.
I’m definitely enjoying your blog and look forward to new updates.
May I simply say what a relief to discover someone that genuinely knows what they’re discussing online.
You definitely understand how to bring an issue to light
and make it important. A lot more people really need to check this out and understand this side of the story.
I can’t believe you aren’t more popular since you certainly have the gift.
Good day! This post could not be written any better! Reading through this post reminds me
of my old room mate! He always kept talking about this.
I will forward this article to him. Fairly certain he will have a good read.
Thanks for sharing!
Hello there! Do you know if they make any plugins to assist with SEO?
I’m trying to get my blog to rank for some targeted keywords
but I’m not seeing very good success. If you know
of any please share. Appreciate it!
These are really fantastic ideas in regarding blogging.
You have touched some nice things here. Any way keep up wrinting.
I could not refrain from commenting. Well written!
I’m amazed, I have to admit. Rarely do I encounter a blog that’s both equally
educative and entertaining, and without a doubt, you have
hit the nail on the head. The issue is something too few folks are speaking intelligently about.
I’m very happy that I found this during my hunt for something relating to
this.
Yesterday, while I was at work, my sister stole my apple ipad
and tested to see if it can survive a 30 foot drop,
just so she can be a youtube sensation. My apple ipad is now destroyed and she has 83
views. I know this is completely off topic but I had to share it with someone!
Greetings from Carolina! I’m bored to tears at work so I decided to browse your site on my iphone during lunch break.
I enjoy the info you provide here and can’t wait to take a
look when I get home. I’m surprised at how quick your
blog loaded on my mobile .. I’m not even using WIFI,
just 3G .. Anyhow, wonderful site!
We are a bunch of volunteers and opening a new scheme in our community.
Your website provided us with valuable info to work on. You’ve done an impressive activity and our entire neighborhood might be thankful to you.
Great web site you have got here.. It’s hard to find quality writing like yours these days.
I really appreciate individuals like you! Take care!!
Thanks for finally writing about >Step Two – Discover Your Hidden Business Deductions
Creating All the Money You Will Ever Want | Healthy Wealthy n Wise <Liked it!
Hi! I know this is kind of off topic but I was wondering which blog platform are you using for this site?
I’m getting tired of WordPress because I’ve had problems
with hackers and I’m looking at alternatives for another platform.
I would be great if you could point me in the direction of a good platform.
These are genuinely wonderful ideas in regarding blogging.
You have touched some nice things here. Any way keep up wrinting.
I got this site from my pal who told me regarding this website and at the
moment this time I am visiting this web site and reading very informative articles or reviews at this place.
Hello I am so thrilled I found your blog page, I really found you by error, while I was searching on Aol for something else, Anyhow
I am here now and would just like to say many thanks for a incredible post
and a all round entertaining blog (I also love the theme/design), I don’t have time to go through it all at the moment but I have bookmarked it
and also added in your RSS feeds, so when I have
time I will be back to read much more, Please do keep up
the excellent b.
Link exchange is nothing else except it is only placing the other person’s web site link on your page at
proper place and other person will also do same in support of you.
Good info. Lucky me I came across your website by chance
(stumbleupon). I have bookmarked it for later!
I am regular reader, how are you everybody? This piece of writing posted at this
web site is truly nice.
Thank you for any other informative site.
Where else may just I am getting that type of info written in such a perfect way?
I have a challenge that I’m just now operating on, and I
have been at the look out for such information.
Howdy would you mind stating which blog platform you’re using?
I’m going to start my own blog in the near future
but I’m having a hard time making a decision between BlogEngine/Wordpress/B2evolution and
Drupal. The reason I ask is because your layout seems different then most blogs and
I’m looking for something unique.
P.S Apologies for getting off-topic but I had to ask!
Hello to all, how is the whole thing, I think every one
is getting more from this web page, and your views
are pleasant in support of new people.
Hello there! Do you know if they make any plugins
to assist with SEO? I’m trying to get my blog to rank for some targeted
keywords but I’m not seeing very good success. If you know of any please share.
Many thanks!
Hello! I know this is kind of off topic but I was wondering which blog platform are you using for this
website? I’m getting sick and tired of WordPress because
I’ve had issues with hackers and I’m looking at options for
another platform. I would be fantastic if you could point me in the direction of
a good platform.
Wonderful goods from you, man. I have understand your
stuff prior to and you’re just extremely fantastic.
I actually like what you have got here, certainly like what
you’re saying and the way in which wherein you
are saying it. You’re making it entertaining and you continue to care for to stay it smart.
I can not wait to learn far more from you. That is really a tremendous site.
Excellent goods from you, man. I’ve be mindful your stuff prior to and
you’re just too magnificent. I really like
what you have got right here, really like what you are saying
and the best way through which you say it. You are
making it entertaining and you still care for to stay it wise.
I can’t wait to read much more from you. This is actually a tremendous site.
Spot on with this write-up, I seriously feel this web
site needs a lot more attention. I’ll probably be returning to read through
more, thanks for the information!
magnificent issues altogether, you simply won a logo new reader.
What might you recommend in regards to your put up that
you just made some days ago? Any certain?
Very nice post. I simply stumbled upon your weblog and wanted
to say that I have truly enjoyed surfing around your weblog
posts. After all I’ll be subscribing for your feed
and I’m hoping you write once more very soon!
I pay a visit daily some blogs and websites to read content,
however this webpage provides feature based writing.
It’s hard to come by educated people on this topic,
but you sound like you know what you’re talking about!
Thanks
Hi there colleagues, its enormous post on the topic of educationand
completely defined, keep it up all the time.
Exceptional post however , I was wanting to know if you could write a litte
more on this subject? I’d be very grateful if you could
elaborate a little bit further. Thank you!
Hello! I just wanted to ask if you ever have any trouble with hackers?
My last blog (wordpress) was hacked and I ended up losing a few months of hard work due
to no back up. Do you have any methods to prevent hackers?
I have been exploring for a little for any high-quality articles or blog posts
in this kind of area . Exploring in Yahoo I at last stumbled upon this site.
Reading this information So i am happy to express that I have an incredibly just right
uncanny feeling I found out exactly what I needed. I such a lot surely will make sure
to don?t put out of your mind this site and provides
it a look regularly.
I have read so many content regarding the blogger lovers except this post is actually a good piece of writing, keep it up.
Yes! Finally something about website.
It’s very straightforward to find out any matter on web as compared to books, as I found this paragraph at
this website.
Please let me know if you’re looking for a article writer for your
weblog. You have some really great posts and I believe I would
be a good asset. If you ever want to take some of the load off, I’d love to write some material for your blog
in exchange for a link back to mine. Please blast me an e-mail if
interested. Thanks!
I’m really enjoying the design and layout of your blog.
It’s a very easy on the eyes which makes it much more
pleasant for me to come here and visit more often. Did you
hire out a designer to create your theme? Superb work!
Hi, I do think this is a great website. I stumbledupon it 😉
I will come back yet again since i have book-marked it.
Money and freedom is the greatest way to change, may you be rich and continue to help others.
I am genuinely delighted to glance at this webpage posts which includes lots of valuable facts, thanks for providing
such information.
What’s up, just wanted to mention, I enjoyed this article.
It was practical. Keep on posting!
Do you mind if I quote a couple of your posts as long
as I provide credit and sources back to your website?
My blog is in the exact same area of interest as yours and my
visitors would definitely benefit from a lot of the information you provide here.
Please let me know if this okay with you. Appreciate it!
I’ve been exploring for a little bit for any high-quality articles or blog posts in this sort of space .
Exploring in Yahoo I ultimately stumbled upon this website.
Studying this information So i’m happy to express that I have a very excellent uncanny feeling I discovered exactly what
I needed. I most undoubtedly will make certain to do not fail to remember
this web site and provides it a look regularly.
I don’t even understand how I stopped up right here, however I thought this publish was once great.
I don’t realize who you might be however certainly you’re going
to a well-known blogger in the event you aren’t
already. Cheers!
Hey there! I know this is sort of off-topic however I needed to ask.
Does operating a well-established blog like yours take
a large amount of work? I’m brand new to writing a blog however I do write in my journal daily.
I’d like to start a blog so I can share
my own experience and views online. Please let me know if you have any ideas or tips
for new aspiring bloggers. Appreciate it!
I love your blog.. very nice colors & theme. Did you make
this website yourself or did you hire someone to do it for you?
Plz respond as I’m looking to design my own blog and
would like to know where u got this from. cheers
Hi there, I do believe your blog could possibly be having web browser compatibility issues.
Whenever I take a look at your web site in Safari, it looks fine however, when opening in I.E., it’s got some overlapping issues.
I merely wanted to provide you with a quick heads
up! Apart from that, wonderful website!
Hi it’s me, I am also visiting this website daily, this
site is actually good and the users are in fact sharing pleasant thoughts.
Excellent items from you, man. I have take into accout your stuff prior to and you’re just extremely magnificent.
I actually like what you’ve got right here, really like what you are saying and the way wherein you say it.
You’re making it entertaining and you still take care of to stay it sensible.
I cant wait to read much more from you. That is actually a terrific website.
Hello! I simply wish to offer you a huge thumbs up for
the great information you’ve got right here on this post.
I’ll be coming back to your blog for more soon.
Hey would you mind stating which blog platform you’re using?
I’m planning to start my own blog in the near future but I’m having a
difficult time deciding between BlogEngine/Wordpress/B2evolution and Drupal.
The reason I ask is because your layout seems different then most blogs and
I’m looking for something completely unique. P.S Sorry for being off-topic but I had to ask!
Here are 20 of the best tall potted vegetation to grow in a container backyard.
chloroquine tablets price https://chloroquine1st.com/
hydroxychloroquine antiviral https://azhydroxychloroquine.com/
cephalexin capsules for dogs https://keflex.webbfenix.com/
generic bimatoprost https://www.jueriy.com/
when will generic cialis be available in the usa https://www.wisig.org/
Excellent post. I was checking constantly this weblog and
I’m inspired! Extremely useful info specifically the remaining part 🙂 I
handle such information much. I was seeking this certain information for a very long time.
Thank you and best of luck.
It’s awesome to pay a visit this website and reading the views of all friends regarding this piece of writing, while I
am also keen of getting knowledge.
online erectile dysfunction prescription https://viatribuy.com/
I was curious if you ever thought of changing the layout of your site?
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 it better.
Youve got an awful lot of text for only having one or two pictures.
Maybe you could space it out better?
You should take part in a contest for one of the finest blogs on the
web. I’m going to highly recommend this web site!
I do trust all of the ideas you’ve presented in your post.
They are very convincing and can certainly work. Still, the posts are too quick for novices.
May just you please prolong them a little from next time?
Thank you for the post.
Good post. I learn something totally new and challenging on websites I stumbleupon everyday.
It’s always exciting to read through articles from other authors and
practice a little something from other websites.
buy cialis http://cialisoni.com/
hydroxychloroquine price in india https://webbfenix.com/
bimatoprost generic https://carepro1st.com/
Definitely believe that which you said. Your favorite
justification seemed to be on the internet the simplest thing to be
aware of. I say to you, I certainly get annoyed while people consider worries that they plainly do not know about.
You managed to hit the nail upon the top and also defined out
the whole thing without having side-effects , people can take a signal.
Will probably be back to get more. Thanks
You can definitely see your enthusiasm within the article you write.
The arena hopes for even more passionate writers like you who aren’t afraid to mention how they
believe. At all times follow your heart. y2yxvvfw cheap flights
azithromycin for sale https://azithromycinx250.com/
cialis online http://lm360.us/