Taxes will be the biggest expense in your life so strategic tax planning is a must

Taxes will be the biggest expense in your life so strategic tax planning is a must.

Taxes will be the biggest expense in your life so strategic tax planning is a must.

Tax code is 75,000 pages and the wealthy use every page of it to legally avoid taxes. And you should too.

Here are 7 tax tips to save you thousands:

1. Agusta Rule (Section 280A):

Allows you to rent out your home for up to 14 days per year without having to pay tax on rental income.

You can host a team retreat, party, event or meeting at your home, and rent it out to your own business.

Example:

You can rent for $500 a night, and have your corporation pay $7,000 for the ‘use’. That’s a $7,000 deduction to your business and you pay no tax on the money.

This not only reduces your taxable income but also offers tax-free income from rent.

2. S Corps:

An S Corp can help you reduce self-employment taxes.

It allows business owners to take a reasonable salary from the company’s profits, so the 15.3% self-employment tax is minimized.

Example:

Assume you are the sole shareholder of an S corp and you earn $100,000 in income.

If you take a salary of $50,000 and distributions of $50,000, you’ll only pay payroll taxes on the $50,000 salary.

This could save you thousands.

3. Hiring Your Children:

If you own a business and have kids under 18, you can pay them $13,850 tax-free, plus deduct it from your taxable income.

When you hire your child, it’s a business expense and you can deduct it from your taxable income, lowering your tax liability.

They can perform tasks such as admin work, social media management, or other age-appropriate tasks.

Your child will owe $0 taxes and you legally avoided tax on $13,850.

They can invest $7,000 of it in a tax-free ROTH IRA.

4. Section 179 Tax Deduction:

The IRS Section 179 Tax Deduction allows business owners to write off the entire cost of a vehicle used for work (cars, trucks, SUVs, vans, etc.)

For tax years beginning in 2022, the maximum Section 179 expense deduction is $1,080,000.

5. Business Expenses:

Business owners can claim many deductions that salaried employees cannot, such as:

• Travel

• Supplies

• Advertising

• Vehicle expenses

• Home office costs

• Internet & phone bills

• Health insurance premiums

• Education & professional development

6. Primary Residence Exclusion (Section 121):

Homeowners can exclude $250,000 of capital gains from the sale of their home ($500,000 if married).

If you sell your primary residence for a profit, you don’t pay taxes on the gain, up to these amounts.