The Secret to Paying Less Taxes
“You don’t pay taxes, they take taxes.” — Chris Rock
Open disclaimer: We aren’t talking tax evasion here, just good old fashioned entrepreneurial insights!
One of the most powerful tools that I use everyday to save money on taxes is one that I always take for granted… Business Write-Offs.
The secret hidden in plain sight.
As I get to know my osteopathy clients better, topics about money and lifestyle inevitably come up. Everyone wants to have a better lifestyle, make more money and have more freedom, but few people are willing to do the research necessary to create this.
“I wish we had more money to do (fill in the blanks)” they often say, which may or may not be an odd thing to say while they are getting a lower back adjustment (crack!).
The topic may seem odd, but it happens so often that my answer rolls out pretty easily, “One of the most powerful tools most people don’t know about is the ability to write off expenses to reduce your taxable income.”
Every time this happens, the spike of curiosity always catches me off guard. For a lot of self-employed entrepreneurs, this concept is very elementary, it’s one of the first lessons of business! But not everyone took that class, and for them its like looking at an entirely new world.
Leveraging your lifestyle
One of the more powerful tools a business has is the ability to claim expenses as a tax write-off. These are costs related to operating the business such as:
- Rent
- Utilities like phone, internet, electrical
- Renovations or improvements
- Inventory
- Equipment purchases
- Travel expenses
While most many people don’t want to open a storefront to access these benefits, they can be applied to a home-based business or home office. Examples of a home-based business can be:
- Freelance Writing
- Youtube Channel
- Podcasts
- Consulting
- Course Creation
- Creating Products for sale
- Network marketing or Direct sales
Naturally, you need to make money in a venture as well, but can this make an impact? Definitely! Let’s visualize for a moment a person who earns $100,000 per year. Their taxes would be on that $100,000.
But a person who makes the same amount annually and has $20,000 per year in business write-offs would pay less taxes. $100,000 minus $20,000 in write-offs, their taxable income is only $80,000!
They maintain a higher buying power as they are able to buy business related items with pre-tax dollars, unlike the person who doesn’t have the ability to write-off business expenses.
What Do You Do With The Savings?
Now that you are saving a little more money at tax time, what do you do with it? You could of course have a little move lifestyle, but a real visionary would continually re-invest in the growth of their business. We all have a future that we are planning for, and there’s no time like the present to begin growing.
Some people like even more asset growth, so you can re-invest that saved money into a tax-deferred investment account such as a Canadian RRSP or American 401(k). That can provide you with even further tax savings… just be aware that this is a tax-deferral, and will be payable upon withdrawal.
Always be sure to chat with your accountant or investment professional first to find out what the requirements and best options are. There’s no one size fits all approach to this.
In Conclusion…
There’s a big misconception when it comes to money. People often think more is better, but in reality it’s not how much you make, but how much you keep. There is always someone out there eager to accept your money, but the one person who is truly worthy of it is your future self.
Be wise with your options.
Ja-On Hillman
Thanks for reading! If you want to see the power behind compound interest in your investments, check out this article!
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