Thread by @ankurnagpal

The tax code in America is rigged in favor of business owners

Here are 15 benefits exclusively for entrepreneurs, business owners & side hustlers:

1 - Paying your State & Local taxes through your business

If you are a W-2 employee in a high tax state like New York or California, you can only deduct $10K of local taxes from your federal taxes

Business owners can deduct the whole thing by paying state taxes from their biz

2 - Augusta Rule

You can rent your home to your business for a team event, offsite, conference or meetup

Not only can you pay yourself a fair-market rent but also pay zero taxes for renting your house for up to 14 days a year

Cool benefit

3 - Qualified Small Business Stock (QSBS)

If you own a C-Corp with less than $50M in assets and sell the company after holding shares for 5 years, pay zero federal taxes on up to $10M

You can also set up trusts to multiply the $10M benefit to $20, $30 or $40M

Massive

4 - Tax deduction for your rent or mortgage

If you work for yourself and have a dedicated home office, you can deduct the proportional square footage from your rent or mortgage

This includes utilities, cleaning, improvements etc.

Full time W-2 workers don't get this benefit!

5 - Access to a Solo 401k

You get access to the most powerful retirement account in America

Up to a $66K tax deduction, ability to invest in any asset you want, tax-free growth, flexibility to borrow from it

(My company @carryhq_ is the best solution for setting one up)

6 - Mega backdoor Roth

With a Solo 401k, you can easily set up a "mega backdoor" Roth strategy

This allows you to contribute up to $66K in 2023, $69K in 2024 in Roth contributions

No better way of getting a very large amount of dollars into a Roth account, every year

7 - Credit card points

You can pay all your business expenses on a credit card

And then use those credit card points for you and your family to travel in style whenever you want

(Don't forget to always transfer points to airlines directly to maximize the benefit)

8 - QBI Deduction

The 2017 Trump Act gave business owners of pass-through entities an automatic 20% tax deduction on small business income

You need to optimize your salary / wages paid to get the full 20% but it's a free tax deduction specifically for business owners

9 - Buying real estate for your business

If your business has a physical location or asset, you can buy the building

You can then use the depreciation losses from the building to offset your business owner income & reduce your tax rate

With bonus depreciation, this is big!

10 - R&D Tax Credit

If your business is working on anything innovative, you get a tax credit for 6%-8% of wages spent on innovation

This is a tax credit not a deduction, so a dollar for dollar reduction in taxes

If your business is not profitable, it can offset payroll taxes!

11 - Cash Balance Plan

If a Solo 401k isn't a big enough tax deduction, you can combine it with the a cash balance plan to deduct $150-300K a year for retirement

"The Cadillac of Retirement Plans"

Makes a lot of sense at a consistent $300K+ of annual income in your 40's on

12 - Hiring your children / parents

You can create employment for your family members!

And if they don't have any other income, you can use this to offset income taxes

As a bonus, they are now eligible to contribute this to a Roth IRA in their name since its earned income

13 - Commercial solar investments

Solar may be the biggest bang for buck tax saving right now

You get a ~40% federal tax credit, depreciation for federal + state taxes & project income

Only business owners get no cap on the maximum amount of depreciation they can claim

14 - S-Corp

If you earn $100K+ in net profit, consider setting up an S-Corp

You pay yourself a fair W-2 salary, & the rest flows to you as profits

You pay no self-employment taxes on the profits, saving you thousands of dollars a year in Social Security & Medicare taxes

15 - Section 179

If you use a vehicle primarily for your business, you can buy a big, heavy car and deduct the entire purchase price upfront

It's a bizarre quirk in US tax law that the vehicle needs to weigh over 6,000lbs to be deductible upfront

Roll out the G-Wagon

I'll stop here, even though I could keep going on and on

The tax code is massively rigged in favor of business owners, so time to start a business

Or at least freelance or a start a side hustle

Back to the top if you want to share this:

https://twitter.com/ankurnagpal/status/1722708190289068072

If you want the *complete* list of strategies and more detailed explanations, we wrote a comprehensive 80 page e-book

A lot of these are time sensitive and need to be set up by December 31 to save on 2023 taxes

Download it for free, here: carrymoney.com/resources/tax-…