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.
3) The principal place of business test.

-You use it exclusively and regularly for administrative or
management activities of your trade or business.

-You have no other fixed location.

If this is your only real property workspace, you should be good on this test.
4) The exclusive use test.

The space needs to be identifiable and not used for personal use. A nice exception to exclusive use is if you are storing inventory in your home.

Examples:
5) Not exclusive use:

-You lay on your couch with your laptop.
-You work at your kitchen table.

These are predominantly personal use spaces you are just doing business in.
6) What should qualify as exclusive use:

-A room in your house that is a devoted office.
-A identifiable corner of a room that is used exclusively for work/business.
-A room/closet/storage area that your regularly store your flipping inventory.
7) What expenses are deductible.

Two methods you can use to calculate the deduction:

-The Simplified Option - Deduct $5/square foot of home use (can be up to 300 square feet - whatever you are using).

This is incredibly easy and does not require expense tracking.
8) - Track all of your home expenses and allocate a % of them.

For example mortgage interest, insurance, utilities, repairs, and depreciation.

Add those up and if you are using 5% of your house (by sq ft) for your business, then you can deduct 5% of those costs here.
9) Note if you are already deducting some of these costs as an personal itemized deductions, you cannot take them twice.

You might be better off with the Simplified Method.
10) What if I rent my house or don't own it?

You can apply a % of your monthly rent, insurance, utilities, etc to your business.

Simply add up all of your costs of renting and apply a % of how much exclusive business space you have in your rental and deduct.
11) If you rent, you should also be able to use the Simplified Method described above, i.e., deduct $5/square foot of exclusive use space in the property you are renting.
12) How to take the deduction.

Once you find you qualify and calculate it, it will be filed on Form 8829. Don't worry about this though - you tax preparer will take care of it or your tax software will automatically lead you there.
If you found this helpful, please like or RT to share.

Also, check out my 121-guide below with 60 more threads like this to help you save $1,000s of tax! I'm giving it away for $27 right now, but the price will never be this low again!

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More from @AskForTaxAdvice

22 Jan
How to get to ZERO income tax!

**NEW AND IMPROVED**

This will cover ANYONE in the WORLD.

HUGE VALUE!

THIS IS MY CURRENT TWITTER MAGNUM OPUS.

Bookmark this, print it out, mark it up, don't try to get through it all today, and

RT it so EVERYONE can benefit!!!

***THREAD***
Section 1: The basics

Income tax is based on income.

Wealth, sales, and ad spend don't attract income tax.

Your income/profit does, BUT not all income is taxable.

So first, if you want to get to ZERO income tax, you need to get to ZERO TAXABLE INCOME.
So how do you get to zero taxable income?

There are two ways:

Only be subject to jurisdictions that do NOT tax income.

OR

Only have income that your jurisdiction does NOT tax.

Let's give two examples of this:
Read 48 tweets
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!!!

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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