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The government and IRS give businesses more tax breaks than individual tax filers. The government does this to promote businesses to grow which in turn grows the economy. The question is how can you, an individual, benefit from this?
I need to insert a disclaimer here; I am not a tax attorney or CPA. You need to consult with your tax attorney and/or CPA to verify and setup a business and take advantage of the tax laws.
Before I get into the how, I will discuss the why you need to own a business. The main tax break a business receives is how it pays for expenses. A business pays for expenses before taxes; whereas, you pay expenses after taxes.
Here is what it looks like:
Individual Income per month: $2,000
Taxes per Month at 25%: $500
Amount Left after Taxes: $1,500
Expenses per Month: $1,000
Amount Left in Individual’s Pocket after Expenses and Taxes: $500
Business Income per month: $2,000
Expenses per Month: $1,000
Amount Left after Expenses: $1,000
Taxes per Month at 25%: $250
Amount Left in Business’s Pocket after Expenses and Taxes: $750
On an income of $2,000 a month, a business keeps an extra $250 a month! That is 50% more than the Individual. 50% more just by paying expenses before taxes!!!!
This is only one of the many tax advantages to owning a business, but can you already see the benefit and power of owning a business?
The type of business you have will dictate the expenses you can write-off; however, here is a list of common expenses that you currently pay that your business could pay pre-tax (again, you need to discuss this with your tax attorney or CPA to determine what your business can pay for).
- Cell Phone
- Car
- Car Maintenance
- Gas
- Internet Connection
- Cable TV
- Computers
- TV / DVD Players
- Lunch/Dinner/Entertaining Clients
- Business Trips (aka vacations)
- Health Insurance
- Part of your Mortgage/Rent (Home Office)
- Part of your Electric Bill (Home Office)
- Part of your Water Bill (Home Office)
- And the list goes on
Do you see how everyday expenses add up quickly and how owning a business could save you money?
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