10 Tax Reduction strategies for Self Employed

As a self-employed individual, you can feel overwhelmed when you search for strategies to reduce your taxes.

Where do we start?

Let’s start with the following 10:

1. Use the Section 05 plan to make your health insurance a tax-favored business deduction on your Schedule C.
2. Employ your under-age-18 child to make taxable income disappear.
3. Employ your spouse without paying him or her a W-2 wage.
4. Rent your office, even your home office, from your spouse to save self-employment taxes.
5. Establish that an office in your home is your principal office to increase (yes, increase!) your vehicle deductions and also turn personal home expenses into business expenses.
6. Give yourself flowers, fruit, and books as tax-deductible fringe benefits.
7. Combine the home office and a heavy SUV, crossover vehicle, or pickup truck to grab big deductions this year.
8. Design a business trip that includes some personal days—days you treat as 100 percent business even though you don’t work on those days.
9. Use the seven-day tax deduction travel rule to create a business trip that is 87 percent personal vacation.
10. Deduct your smartphone and provide smartphones to your employees as tax-free fringe benefits.

Note:  Consult your tax advisor prior to implementing any of these strategies!

Conflict of Interest

If your advisor is selling you an investment that he/she makes a commission on, there will always be an inherent conflict of interest.  Is the investment good for the client or better for the advisor’s wallet?  This is a more extreme case where investors lost a lot of money, but I’m sure that the advisors were attracted to the 9% commission payout:

https://www.investmentnews.com/article/20190624/FREE/190629964/gpb-paid-b-ds-and-reps-steep-commissions-to-sell-troubled-private

Do you really want that big house in retirement?

Interesting article from the WSJ:

https://www.wsj.com/articles/a-growing-problem-in-real-estate-too-many-too-big-houses-11553181782?mod=e2tw

It just never seems to change

You would think that folks would learn that there is no free lunch and that no investment person can guarantee returns.  However, folks still learn the hard way.

ps.  No regulated investment professional can accept your investment money via Venmo!

SEC Seeks Emergency Relief to Halt Ponzi Scheme Run From College Fraternity House

Congress voting on retirement changes

A link on Yahoo regarding the upcoming vote:

https://www.yahoo.com/finance/news/4-ways-that-washington-may-soon-change-how-you-save-for-retirement-154824097.html

Should you apply for medicare at 65?

The folks at Medicare.gov have put out a good question and answer PDF with different scenarios to help clear up the confusion about when to apply for medicare.

Do I apply for both A and B medicare at 65?

Where are the Atlanta offices for SS and Medicare?

What’s the real story with 2018 taxes?

The media has been all over the fact that many are not getting a refund this year and actually owe taxes this year.  Actually from what I’m seeing, they are correct.  However, it has nothing to do with the 2018 Tax Cuts.

Employers lowered the amount they were withholding from employee paychecks in 2018 and now it is coming back to haunt those taxpayers.  Overall, what I’m seeing is that most are in a lower tax bracket (a few percent), but unfortunately did not withhold enough throughout 2018, so they owe.  Especially those with higher incomes (limit on state/local tax deduction is also hurting).

Go ahead and adjust your W4 so that this doesn’t become a reoccurring problem next year:  https://www.irs.gov/individuals/irs-withholding-calculator

Understanding the new tax deduction for self employed/ rental income

Just posted a newsletter that gives examples and explains the new 199A deduction.  Download the newsletter here:  Tax Newsletter Feb 2019

bank consolidation

Today BB&T and Suntrust announced a merger.  I guess to survive and compete with the mega financial institutions they had to, but dang look at this graphic from 1996 to 2009 of how the last few standing have gobbled up everyone: (click on image and it will enlarge for viewing)

20% pass through deduction for Rental property income

The IRS has clarified the new tax law and its impact on rental properties.  Originally the wording stated that small businesses and REIT’s would get the 20% pass through but for owners of residential rental properties it was unclear.  They have now issued guidance and if you treat your properties like a business and spend over 250 hours annually on them (client service, collecting rent, repairs, etc) then you meet the safe harbor test to deduct 20% of net rental income from passing through to your tax return.

More info here:  https://www.irs.gov/pub/irs-drop/n-19-07.pdf