How can you lower your taxes as a W-2 employee, without quitting your job? EASY! Start a side gig. By starting a business while still working, you may be able to allocate a portion of your personal expenses, such as your phone bill, internet, or automobile, that you are paying now - to operate your side gig business which converts them to tax deductible business expenses. That savings goes straight to your bottom line - directly increasing your income. I share several examples of how significant this can be in Claim Your Dream Life.
Essentially, the government will subsidize you to start a small business. Of course, you will need to understand and follow IRS guidelines and the advice of your accountant.
There is a lot of talk about the number of jobs that have been created and how low the unemployment rate is. That said, I can’t help but wonder how many good jobs have been created?
Many are low paying, service sector jobs that quite frankly - no one wants! I personally have met very few people who have both a job and a lifestyle I’d want.
Perhaps more importantly, it is unlikely you can get ahead - much less acquire significant wealth unless you learn how to get your tax obligations down to the bare legal minimum.
The first step is understanding that there are two very different tax systems in the US. There is one system for employees and a completely different system for business owners.
The former pays their taxes first, before ever receiving any proceeds of a paycheck. The latter pays their taxes last, after they deduct a long list of legally available business expenses.
Business owners, unlike employees, are only taxed on the portion of their “income” that’s "left over" after all of these marvelous, perfectly legal tax deductions. It is astounding to me how few people bother to learn and really understand this important distinction.
Why wouldn’t everyone have a home-based business? You can even deduct a portion of your living expenses if your home is your primary business location - of course if you follow the rules!
The wealthy also use a strategy called “income shifting”, and there is no reason you can’t too. Properly documented, you can deduct travel, lodging, meals, cruises (by taking courses), conventions, seminars, medical expenses and premiums. You can legally hire your spouse, kids or other relatives.
There are even sale and lease-back strategies that can essentially give you a double tax deduction for some expense. The wealthy understand the significance of using the tax code to build wealth That’s why I often say my favorite bill to pay is the one for our accountant.
How do you find a good one? (That’s VITAL) For many years I’ve recommended a great book you can get on Amazon - worth its weight in gold! It has a list of "must ask" questions for anyone you considering relying on for tax advice. It's awesome, and I use it to interview potential accountants.
The author, Sandy Botkin, is a former IRS Attorney and he not only shares many of these strategies - he explains exactly what you need to document the deductions to become audit proof. His writing is very easy to read and entertaining - he’s actually quite funny! You can grab a copy of it by going here.