Slash Income Taxes By Doing What You Love?
That’s right, you can take advantage of the IRS tax code and save a lot of money that you’d otherwise send to Uncle Sam by doing what you love.
The secret is to simply set yourself up as a small business and take tax deductions for related expenses! This is very easy and inexpensive to do. You can then turn many personal expenses into business one that you can deduct!
It doesn’t matter if you are retired (in fact this is a perfect time) or just getting started in life. You can start doing a business in virtually any niche or subject that you love or have a passion about.
For example, if you are passionate about photography, there are multiple ways to offer a product or service to others for a fee, commission or whatever. I have a retired client that loves to travel to Italy. In fact they are on their way there as I write this for an extended trip.
Wouldn’t it be nice if the IRS would make virtually all of their travel expenses deductible?
There are multiple ways they could accomplish this in return for a little effort. They could write a travel guide to the particular region they will be staying in with reviews on restaurants, museums, stores, things that are a “must” see or do and other things that are worth skipping and why.
It could be just published as a $19.95 e-book. Don’t want to write anything? What about organizing a trip for others with you as their “guide”. Simply organize a trip with friends from church, old schoolmates, etc.
You can either become a travel agent or work with one to put together a trip making a profit on the
difference between the costs the airlines and hotel charge and the “package” that you offer it for.
If you love horses, you might be able to offer rides for a fee at birthday parties or church events.
I could go on and on with potential ideas of taking something that you love to do and making it into a business to enable you to save thousands of dollars on your taxes. But let’s discuss how this works in general terms of taking your “expenses” and deducting them from your tax return.
But first you have to set up your business. Yes, you can incorporate (or set up an LLC) and I would highly encourage you to do so.
In some states you have to go to the court house and fill out a form known as a “DBA”. That’s for “Doing Business As”. So you could say… Jane Doe (your name) doing business as Tax Saver and Associates.
Your business does NOT have to make a profit in order to legally take those deductions…. but it does need to have a “profit motive”! Under the IRS rules, a profit motive is presumed if you earn ANY net income during any 3 out of 5 tax years.
In fact, your business need NEVER actually be profitable to keep your business deductions going as long as you can keep proving a profit motive. Did you know that Amazon.com has yet to show a profit after all these years and billions of dollars in sales? But nobody could successfully argue that they don’t have a profit objective.
There are a number of tests or standards that would indicate that there is the goal to be profitable which nclude the manner in which you conduct your business, the effort and time that you can prove that your devout to uour business, your expertise in that field. Do you have business cards and letterhead? Are you keeping accurate records, have an outline of a business plan written down?
Then, you will be able to deduct most or all of your expenses directly related to your business or “hobby for profit”. If you have a home office, you’ll have a number of other partial potential tax deductions such as: office furniture and equipment, deprecation, homeowner’s insurance, utilities and more.
Like to travel? How would you like for the IRS to help you pay for some or all of your travel expenses? On ANY type of business or niche there are many conventions, conferences, functions or similar businesses that you can meet and learn from — all over the WORLD – that you can go to.
On any given day there are literally hundreds of seminars and such on going on. If you are a little bit creative, you can “justify” why your business made the decision to invest the money to attend to learn and network with others in your field.
If you follow the IRS rules, you can deduct all or much of your travel expenses to get there, your hotel, your food, cab fare and so on. Where and when do you want to go? Just look for something going on that might make sense for your business and let the IRS help you pay for it!
Start a business and slash your taxes today!!
