Using entities with the correct tax elections and in the correct combinations can lower your overall tax bill significantly – legally.
Tax Benefits
Do you know that:
- You can save thousands of dollars in tax when you take income from a company that has been structured properly?
- You can gift ownership of your family limited partnership to your children, and over time have their tax brackets work to your advantage?
- You can take different tax deductions in entities with different tax elections?
C corps are allowed the most tax deductions, and they are the only entity that does not have to end its tax year on Dec. 31st.
Here are a few potential C corp deductions:
Health care items: if you have an employee reimbursement plan, you can deduct a wide variety of items, particularly if you have a letter from your physician saying that these items would be beneficial to your health; e.g. vitamins, massage, hearing aide batteries. If you suffer from chronic back pain, is your doctor prescribing a hot tub?
Auto deductions for business: include washing and detailing the car. Don’t forget those quarters in the vacuum machine.
Legal, accounting, bookkeeping and administrative fees: Don’t forget business licenses and parking fees while you stand in line to get your business licenses. Remember any books you buy on the subject or membership in pre-paid legal.
Business infrastructure costs: cell phones, landlines, fax, internet, wireless networks & cables, IT support, website hosting, email fees, equipment such as fax, printers, computers, PDAs, phones, headsets, belt clips, GPS for the car, furniture.
Books, magazines, newspapers, DVDs – anything with information you might want to talk to a client about – and remember how varied your clients’ interests are.
Memberships in networking organizations, associations, clubs etc. where you can meet or to which you can bring clients.
Office expenses: the obvious ones like pens, ink, toner, paper, postage, batteries etc. but also bottled water, snacks and coffee for the office, paper towels and other supplies. This is important if you have a home office as these items tend to migrate from home to office without being recorded. Include stereo equipment in the office to listen to educational materials, TV to catch up on the news or view business DVDs, decorating costs.
Meals for business purposes, including those late night Chinese meals eaten in your home office.
Groceries purchased for business entertaining.
Losses not covered by insurance.
Pool maintenance costs, if you have a home office and as a policy employees are permitted to use the pool during breaks. Check with your insurance first. Also, exercise equipment, if the policy extends to that equipment as well.
Advertising and marketing costs, including entertainment of clients or potential clients.
Awards for documented company programs.
Building costs, office rental or deduction for home office. Remember, the costs include a portion perhaps of landscaping, decorating etc.; not just utilities.
Gifts to clients, charities etc. Check on the limits.