Tax Loophole Alert

Employ your child in your business.

Teach your child a skill and save $1,000s of tax per year!

***Thread***
If you own a business and there are jobs your child can do for it, employ them and pay them.

Your child gets to be part of the family business and learn skills.

You get a deduction.

Typically they are in lower tax bracket than you, if they pay tax at all.
Example

You hire your 14 year old to send out cold emails and set up sales calls.

You pay an hourly rate, which ends up being $10k per year in wages.

You deduct $10k, which saves you the following:

-Fed Income Tax: 24%
-State Income Tax: 5%
-SE Tax: 2.9%
Your deduction is approx. 1/3 of $10k or $3,333!

Your child takes the standard deduction of $12,200 and pays $0 tax.

Win, win, win, win...

Family time, skill transfer, wealth transfer, tax savings.
Q&A

Q: How much to I pay them?

A: Needs to be market rate. You can't purposely overpay them.

Q: Child labor laws?

A: I'm no expert there, but by understanding is over 16, no limit hour but non-haz, over 14, limited to non-school hours, and under 14, non-haz family businesses.
Bonus - $5M maker!

Have them contribute their earnings to a ROTH IRA.

If you felt this thread was valuable, please RT so your friends can see it, too.
This thread above is the type of guidance you want from your tax advisor.

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More from @AskForTaxAdvice

22 Jan
If you have REAL ESTATE investments, you are likely MISSING this tax savings.

ELEVATE YOUR CAP RATE via this tax loophole!

Everyone likes the tax benefits of real estate, but few talk about this huge one that is more relevant NOW than EVER.

***Thread***
1) For tax purposes, real estate costs are deducted over the useful life of the property.

All that means is if you buy a $1M property, you don’t get a $1M deduction the year you buy. You take it over 27.5 or 39 years depending on property type.
2) If you think about in terms of net present value, you will eventually deduct the full $1M, but it’s spread out for decades, significantly diminishing the tax benefit.
Read 9 tweets
22 Jan
Tax Loophole Alert!

Here's how to pay ZERO tax on your real estate flips!

This is a great one!

Are you handy? Do you like interior design? Have you considered flipping residential real estate?

***Thread***
2) Buy your house to flip.

Move in. Literally.

Make repairs and upgrades. Do whatever you do when you flip a house.

Stay exactly two years (or more).

Sell for a huge gain.

Pay $0 tax on the gain!

Repeat every two years.

It's called the home sale exclusion.
3) If your sole income is from flipping residential real estate, you could have a 0% tax rate (US).

Insane!

Q: How many times can I do this?

A: Once every two years. No lifetime limit.
Read 5 tweets
21 Jan
How to make your child a $5 millionaire,

with NO TAX to them,

deductions for YOU,

on an amount less than a nice bar tab...

***Thread***
2) You need to be some type of business owner..

You need to employ your child so they can contribute to a ROTH IRA.

There are a few things you can employ your child to do.

On easy example is being a "model" in your business marketing materials (e.g. pics for advertising).
3) Create an employment contract with your child (for marketing materials, etc).

Pay your child up to $6,000/year (must be a market rate of pay). This is deductible to your business so net a couple $100/month.

Contribute this money to a ROTH IRA in your child's name.
Read 5 tweets
21 Jan
Tax Loophole Alert!

Save up to $500 of tax!!

Did you work from home in 2020?

So many of us did.

Did you have a business that you worked from home for?

Here's how to deduct expenses related to your HOME OFFICE.

***Thread***
1) You do not need a business entity (LLC, Corp, etc) to take deductions for your home office. You just have to be engaged in a profit seeking activity.

If you have a business - even a small side hustle - you just need to meet the following two requirements:
2) Space in your home should be used as:

- The principal place of your business.

- Used regularly and exclusively for your business.
Read 14 tweets
21 Jan
Tax Loophole Alert!!!

How to save $500 to $1,500 of tax per year by

DEDUCTING YOUR MILEAGE!

***Thread***
1) If you drove your personal car for your business in 2020, you can deduct $0.575/mile. Similar in 2021.

That is more than it sounds.

For example, if you drive 100 miles per weekend sourcing product from a few Walmarts, that 5,000 miles per year is a $2,875 tax deduction!
2) In lieu of mileage, you can track your actual expenses like gas, oil changes, repairs, depreciation, and allocate based on personal use.

This is a headache and the $0.575/mile might be more than you are actually spending, depending on the cost and fuel economy of your car.
Read 5 tweets
21 Jan
Are you feeling the NAGGING pain of getting ready for tax time?

I'm going to show you how to GET CAUGHT UP IN TWO HOURS to save you PAIN.

Did you start a business in 2020? Did you keep any books/records?

If your answer is "no," you aren't alone.

***Thread***
1) Your Business Income

Open a spreadsheet.

List all the platforms you sold on in 2020.

Have a link to the login page for each.

Pull your 2020 sales report and drop this number in.

Manually add any cash sales or platforms that don’t give you a report.
2) Your Business Expenses

Gather all receipts from major purchases.

Pull 2020 reports on every account you spend money on for your business (ideally you don’t mix business on personal on the same account. Ha!)

Quickly scan and mark anything you think is business.
Read 9 tweets

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