Now that the media has completely stopped talking about the tax reform, now we can sort through the actual bill to find out what is real and what is just over exaggerated noise from the media. As a profit consultant, I focus on helping clients to become more profitable in their businesses. Tax savings is one of the main sources that business owners can use to increase their profits and cash reserve. Saving money on your taxes will give you the fastest return on investment. But first, you need to start playing your cards right. In doing so, learning to keep more of the money you make will be extremely important.
- Stop leaking all the money from your business in pointless expenses that will keep you broke
- Implement tax planning that will help to return cash to you in your business
- Have a roadmap that will help you to control expenses and know your cost of doing business
Doing these things will help you to benefit significantly from the tax law changes that will be in effect this year. This new law now provides additional incentive to reward business owners who are profit focused so that they can continue to reduce their taxes. The new Section 199A deduction provides a 20% deduction for business income. There are many rules (all new, of course), but your odds of qualifying or benefiting from this new deduction are excellent.
Rejoice if you operate your business as a sole proprietorship, partnership, or S corporation because your 2018 income from these businesses can qualify for some or all of the new 20 percent deduction.
When can you as a business owner qualify for this new 20 percent tax deduction with almost no complications?
To qualify for the 20 percent with almost no complications, you need two things:
1) You need to make a profit (business income minus business expenses).
2) To avoid complications, your “profit” should be less then $315,000 or less if married filing a joint return, or $157,500 or less if filing as a single taxpayer. If you make more than this amount, then additional planning steps are required to help you to qualify for the deduction.
For example, you are single and operate your business as a single member LLC. It produces $150,000 of profit. Your other income and deductions result in defined taxable income of $153,000. You qualify for a deduction of $30,000 ($150,000 x 20 percent).
Now, this money that you will be saving, the goal is to see it sitting in your bank account but you will have to make the right planning move to make this happen. What business owners often do is not plan for taxes ahead of time so that they can have this cash parked in their bank account and not send the money to the IRS. To get this cash flow effect in your business, owners will need to implement money-saving steps to have their tax saving available for them to invest and start building their wealth.
The big decisions for 2018 will include:
1) Does your entity still work for you?
2) How much salary are you paying yourself (this is running your salary through an actual payroll system)
3) How much of the 20% deduction will you receive based on the combined effect on #1 and #2.
For information on how to implement, these money-making steps schedule a free consultation here
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