Nash Commerce
Regular Member
- Jun 29, 2020
- 539
- 862
This is a list of legal tax loopholes and strategies to lower your taxable income after your normal business expenses.
This is for the U.S. however it could apply to your country (do your own research.)
1. Standard deduction = $12,550
2. QBI (qualified business income deduction) = 20%
3. 1/2 of rent and utilities for home office = $6000
4. The Augusta rule (rent out your home to your business for 14 days tax free at a reasonable rate) = $7,000
5. Car mileage write-off for business use = $0.57 per mile (a cheaper car produces a large profit here)
If you netted 100k this year, you now have to only pay tax on $45,900.
20 Seconds of reading just cut your tax bill by over 54%.
*Billy Mays* BUT WAIT, THERE'S MORE!
6.. Real estate (It's own section as it gets juicy)
- Cash-Out Refinance (take equity out of the property you own, pay no taxes because you technically didn't sell and keep the property rented)
- 1031 Exchange (If you do decide to sell, you can roll the proceeds into another property of equal or larger proportion to avoid paying any capital gains tax)
- Depreciation ( This is where the true magic happens. Depreciation is a tax deferment that allows you to write off 3.6% of the total property value per year in estimated "depreciation". 100k house = $3,600 in deduction per year. )
You put down 20% to buy a rental property that is $100,000.
You invest 20k. You rent out the house for $800 / month.
You gross $9600, net $6600 after property tax, insurance, and loan interest.
Your mortgage is $2700 / year (building equity)
The mortgage payment is written off because you're paying down debt and will later cash-out refinance or 1031 like we previously mentioned. But you're still building equity and can access that money with a line of credit tax-free if needed for investments.
We now are building $2700 / year in equity tax-free.
We are cash flowing $3,900 BUT our depreciation is $3,600 / yr. so that's tax-deferred
$6600 / yr. on the investment. and we only pay taxes on $300 of that.
Or do we...
Anything leftover that the IRS can still tax (if using 100k net profit, maybe 30k left in taxable income) we prepay our Facebook ads, prepay employees, invest into our rental properties to raise the value, buy software, buy tools, or buy company cars.
You would have been paying roughly $37,000 in taxes. You just paid $0 legally.
I'm 22 and do very well for myself now. I saw my estimated tax bill, cringed, then did days of research.
I knew I had to share these with the community that helped me get here.
Love you all <3 * Not a tax professional, entertainment only, do your own research.
This is for the U.S. however it could apply to your country (do your own research.)
1. Standard deduction = $12,550
2. QBI (qualified business income deduction) = 20%
3. 1/2 of rent and utilities for home office = $6000
4. The Augusta rule (rent out your home to your business for 14 days tax free at a reasonable rate) = $7,000
5. Car mileage write-off for business use = $0.57 per mile (a cheaper car produces a large profit here)
If you netted 100k this year, you now have to only pay tax on $45,900.
20 Seconds of reading just cut your tax bill by over 54%.
*Billy Mays* BUT WAIT, THERE'S MORE!
6.. Real estate (It's own section as it gets juicy)
- Cash-Out Refinance (take equity out of the property you own, pay no taxes because you technically didn't sell and keep the property rented)
- 1031 Exchange (If you do decide to sell, you can roll the proceeds into another property of equal or larger proportion to avoid paying any capital gains tax)
- Depreciation ( This is where the true magic happens. Depreciation is a tax deferment that allows you to write off 3.6% of the total property value per year in estimated "depreciation". 100k house = $3,600 in deduction per year. )
You put down 20% to buy a rental property that is $100,000.
You invest 20k. You rent out the house for $800 / month.
You gross $9600, net $6600 after property tax, insurance, and loan interest.
Your mortgage is $2700 / year (building equity)
The mortgage payment is written off because you're paying down debt and will later cash-out refinance or 1031 like we previously mentioned. But you're still building equity and can access that money with a line of credit tax-free if needed for investments.
We now are building $2700 / year in equity tax-free.
We are cash flowing $3,900 BUT our depreciation is $3,600 / yr. so that's tax-deferred
$6600 / yr. on the investment. and we only pay taxes on $300 of that.
Or do we...
Anything leftover that the IRS can still tax (if using 100k net profit, maybe 30k left in taxable income) we prepay our Facebook ads, prepay employees, invest into our rental properties to raise the value, buy software, buy tools, or buy company cars.
You would have been paying roughly $37,000 in taxes. You just paid $0 legally.
I'm 22 and do very well for myself now. I saw my estimated tax bill, cringed, then did days of research.
I knew I had to share these with the community that helped me get here.
Love you all <3 * Not a tax professional, entertainment only, do your own research.