It’s December – Have You Spoken to Your Accountant Yet?
Meeting with your CPA is a very smart use of your time…especially when the subject is TAX CREDITS and TAX REDUCTION.
Tax credits are like cash in the bank. Unlike a tax deduction, a tax credit creates a dollar for dollar payment on your federal or state taxes (or both) without actually sending your hard-earned cash to the government. We are always looking for tax credit opportunities that align with our business goals.
Tax Reduction Strategies help you lower your taxable income. The number one strategy to lower taxes is to become a business owner. When you own a business, a good portion of things you spend money on are legitimate business tax deductions.
December 31 is right around the corner. This is time sensitive!
If your company is having a profitable year, now is the time to lower your tax bill by making a few year-end tax reduction moves.
Please understand…we don’t provide tax or legal advice for hire. You should speak with your CPA, Tax Attorney or enrolled agent for tax advice. We are reporting on these topics as a service to our clients and those who should be our clients in the near future.
4 Ways to Lower Your Taxes… Big Time!
Tax Credit #1 is often overlooked…and every lawn and landscape business owner can claim their credit by following this plan. If you own a commercial lawn mower, backpack blower, skid loader or other off-road equipment, and you purchase fuel for this equipment (duh), you are entitled to claim your Off Road Fuel Tax Credit.
We published this tax reduction article in 2017 and every strategy we explain is still available to you today. We went to great effort to explain the tax credit in complete detail. My client in VA got a $20,000 refund after he read this article. I hope you will get a BIG refund too. Read the article here. The more off road fuel you buy, the bigger the refund you earn!
Tax Reduction Strategy #2 – Pay yourself first! Never let the year end without YOU funding your future retirement. Funding your personal IRA is a great way to get started with the habit of “paying yourself first”. If you open a personal IRA and fund it at the $6,000 limit (or $7,000 if you are over 50 years young) you are reducing your taxable income by $6,000 (or $7,000) and you save yourself $600 to $2,220 on your federal income tax (depending on your tax bracket).
As your company grows profits, set up a Simple IRA for your company. This allows you to grow your retirement account contribution to $14,000 for 2022 and if you are 50 years or older, you get to add $3000 for a total of $17,000. The Simple IRA also allows you to add 3% of your W-2 salary to your total deduction.
Let’s say you pay yourself $50,000 per year, then 3% of $50,000 is $1,500. In this example, if you are over 50 years old, you would be able to contribute up to $18,500 to your retirement program. Depending on your income tax bracket, this could reduce your federal income tax bill by $1,850 to $6,845 in 2022.
Think about the tax reduction you accumulate if you do this for 10 years. You could lower your tax bill by $18,500 to $68,450. Who do you think is going to do a better job managing your money, the government or you? Listen, pay yourself first.
Double this tax deduction:. IF your company is profitable enough, add your spouse to your Simple IRA program and fully fund his or her account as described above. Not only are you growing your retirement savings, you double your tax deduction. This could reduce your taxes $37,000 to $136,900 over a 10 year period. That could be a game changer for your family!
One more important point on this subject.
If your company is unable to provide you with enough money to fund your personal IRA or set up a Simple IRA in your company, there’s a problem. Your profits are too low. The good news is that this problem can be fixed. You and your company should attend an upcoming Profit Builder Training Event. We provide the training to help your company double profits in 12 to 24 months. We’ve had over 400 lawn and landscape companies join us and enhance their business skills.
Tax Reduction Strategy #3 – Which brings us to an important point. When you invest in your education, such as attending the next Profit Builder Training event, you get a tax deduction. You can deduct the cost of tuition, travel and a portion of the meals. If you have read this far and you have not taken advantage of the deductions listed above, it’s a clear sign you could benefit from this type of business training. Invest in your education. No one will EVER be able to take away your education…and you get a tax deduction!
Please, please, please. Never forget. The first step to become the Wealthy Landscaper in your town is to operate an exceptionally profitable company. The second step: learn how to reduce your taxes!
Tax Reduction Strategy #4 – As we explained above, the best tax reduction strategy available in the USA is to own a business. If your company is profitable, you can legally pay $0 in taxes using this next strategy. It’s called the section 179 deduction. It’s pretty simple to explain. At times, it may even sound too good to be true. But it is true.
You have the ability to deduct up to $1,080,000 in qualified purchases of equipment the year the equipment is put into service. So, you could avoid paying taxes on over $1,080,000 of income with these four strategies. If you don’t want to send the federal government tax payments, you simply buy equipment to claim this deduction.
It may be hard to believe, but even if you purchase the equipment with financing (debt), you can still claim the section 179 deduction. You can thank the President elected in 2016 for that one. From 1987 to 2002, the section 179 deduction was less than $24,000 per year. From 2003 to 2007, the section 179 deduction was between $100,000 and $125,000. The section 179 deduction grew to $1,000,000 in 2018. This was HUGE for our economy…and for tax reduction!
This section of the tax code encourages business owners like you and I to invest in equipment to grow our businesses. So, in our opinion, this is one reason why our economy continues to expand. Business owners are treated very kindly from a tax standpoint. However, the rules for the section 179 deduction will begin to change in 2023.
As we said at the beginning of this article, this report is not designed to provide tax or legal advice. But the facts can’t be ignored. Tax rules regarding section 179 and the bonus depreciation policy begin to change in 2023. The deduction is reduced to 80% of investment in 2023, then is reduced to 60% in 2024, 40% in 2025 and 20% in 2026. In other words, your maximum opportunity to deduct equipment expenses ends in 2022.
If you and your company need a year end equipment purchase to lower your taxes, now is the time to get it done…Before December 31!
If you would like to add a new truck, replace an old truck or prepare for a new crew in 2023, we invite you to contact Maxx Bass at Super Lawn Trucks. You can reach him at 866-923-0027 or email him at Maxx@SuperLawnTrucks.com . We know that he has a handful of trucks that can be delivered before year end allowing you to maximize your tax deductions.
One final note: Don’t overpay your taxes! Claim your tax credits. Pay yourself first. Take advantage of the tax deductions available to you.
Tony Bass, founder
PS – According to our research, over 80% of lawn and landscape business owners OVERPAY their taxes each year.
Tony Bass does not provide tax or legal advice for hire. This email and the articles we have published on the subject of tax reduction are for educational purposes and should NOT be construed as tax or legal advice. Please consult your CPA, Tax Attorney, or Enrolled Agent for tax and legal advice.
But Please…check this out BEFORE year end and your tax reduction opportunity expires…
Just because I don’t provide tax advice for hire…It doesn’t mean the information is wrong.