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My graduates from my school being forced back drop drop Mike.
There are advantages of being a business owner, and that's something that we want to encourage. Entrepreneurship for a lot of different reasons, not just to take money of your taxes, but it's one of the perks that comes with being a business owner because even if you look at it from a corporate standpoint, like large corporations, the corporate tax rate is twenty one percent, right, that's but the highest
federal tax rate for individuals is thirty seven percent. So if you're a wealthy business like Amazon, or if you're a wealthy person right like a basketball player or an NBA player, NFL player, whatever, and you're at the highest federal tax rate, you're at an advantage to be a corporation because the most you can pay is twenty one percent. Now you're working your way down from there, whereas the federal tax rate. The highest you can pay is thirty
seven percent. You have to work your way down from there. So we're gonna take down a micro level, and you know, talk about small businesses because you know that's the majority of businesses in America and in the world of small businesses. Right Amazon, We talk about Amazon and Netflix, but that's not typical. Those aren't the majority of businesses in America.
So as a small business owner, I'm going to speak from first had experience, whereas I can say that you have benefits of being a business owner because you can deduct a lot of things. Right, So when we talk about Amazon as far as their travel and things of that nature, it's the same thing with a small business owning on a certain level. Where you travel, you see a client, you can deduct that, you take your client
out for a mal, you can deduct that. You lease a car, you can deduct that the mouths as long as it's for business, so your cell phone, you can deduct that. You buy furniture for your office, you can
deduct that. So you have a lot of things that you can deduct, where if you just have a regular job, you can't deduct any of that stuff, right, So it's hard for you to do anything with your taxes if you just have a regular job, because there's only so much that you can actually deduct, right, Where a business owner you can you can get creative, be responsible, responsible,
be responsible with that. So okay, it's all right. So when we talk about the advantages for people that may not be familiar or people that want to be business owners or want to be entrepreneurs, what are some basic advantages that entrepreneurs and business owners have as far as the tax system as opposed to regular individuals.
Well, first, I always tell people, because do you get that question a lot, what's the advantage of me being a business owner or even claiming self employed, right, because then you are a business owner as well versus me being an employee. And I always tell them employees are taxed first and they have to pay their bills later, where a business owner pays their bills and then they are charge tax on what's left.
Right.
And so, like you said, we can't as a business owner. There's a ton of things that you can write off, right, Like you can write off your travel, you can write off your meals, you can write off anything that relates to your business, your supplies, your employees. Right, So everything that relates to your business you're able.
To write off. You know.
I know we spoke about it and covered it a little bit when we were talking about Amazon, but even Capex, right, if you have any type of machinery or you know, warehouse or even for my real estate investors or you know, just landlords, even if you have one and you don't have like multiple properties. So if you're doing things to your property like capital improvements, you're able to write that off one hundred percent, right, versus being a homeowner, where
you're not able to write that off at all. Right, So those things are very important when you are a business owner.
Yeah, well, yeah, exactly, And that's something that people have to fully understand. I like what you said as far as taxes, I don't know I forgot exactly how you framed it. But regular people, regular people, people, people, people were people were regular jobs pay taxes first. Business owners pay taxes last. Right, So you can make one hundred thousand dollars, but then by the time you have all your deductions, you might only pay taxes on twenty thousand. Yep.
Now it's important to be responsible with that because the good thing about having a regular job when it comes to taxes that you don't have to worry about paying the taxes. It's done for you, right, it's taken out of your paycheck. So most of the time you might even get money back at the end of the year because they've they've taken too much money out right, whereas a business owner, they're not taking any money out of your paycheck. So you either pay quarterly or you pay
at the end of the year. So what happens a lot of times is that you don't save to pay your taxes. Right. So let's say you make a hundred thousand dollars, right, but you're living like you make one hundred thousand, So like everybody, you're spending one hundred thousand. You're living up to the limit. So now when it's tax time, you have a tax liability for twenty five thousand, thirty thousand, but you don't have twenty five thousand saved. So now you're behind on your taxes, right, and before
you know it, the next tax year comes around. And this is how a lot of business owners fall into tax trouble because it's up to you to actually pay it. It sounds easy, but it's not easy at all.
It's a lot of discipline.
I try to and a lot of systems for my clients, one being quarterly taxes, getting me in there doing your bookkeeping quarterly, whether it's me or you just you know, you just kind of knowing what your income and expenses are for that quarter. But that's important because at the end of the year, paying twenty five hundred quarterly versus paying ten thousand at the end of the year seems like a you know, a world of difference, you know,
so I do. That is important and I'm glad that you brought that up because it sounds good, like, oh, I get to pay my taxes later. But imagine looking at your W two and you're like, oh, I paid out twelve thousand this year.
Imagine that twelve thousand.
Once at once at the end of the year. You're not gonna want to pay it.
Oh you don't have it.
Oh you don't have it.
You don't have it too pay Okay, So before.
We go any further, because you said a few things real estate, and you said regular people, and I guess you go with your everybody.
So everybody's not a business own, right, so most people aren't business owners. Right, So we talked about the advantages of business. Well, there's also things that regular people with regular jobs can take advantage of as well. Right, So, okay, I'm a business owner. Enjoy you're a school teacher.
I'm an educator.
Okay, Okay, So I spoke. I spoke from the business season standpoint. Yeah, so I want you to talk on the other side of the flip side of the right.
So I'm an educator, and taxes are taken out, and like I said, we have a set salary and that works in our benefit, especially when we want to go to do things like purchase a home. Right when we look at our income, our income is steady because it's the same thing. Whereas you, for example, you might have made a one hundred thousand, but if your deductions was seventy five thousand, when the bank looks at it, they said that your income's only twenty five thousand, you might not be able to be.
Approved for a loan.
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pushing your vision forward. This episode is brought to you by P and C Bank, a lot of people think podcasts about work are boring, and sure, they definitely can be, But understanding of professionals routine shows us how they achieve their success little by little, day after day. It's like banking with P and C Bank. It might seem boring to save, plan and make calculated decisions with your bank, but keeping your money boring is what helps you live
or more happily fulfilled life. P and C Bank Brilliantly Boring since eighteen sixty five. Brilliantly Boring since eighteen sixty five is a service mark of the PNC Financial Service Group, Inc. P and C Bank National Association Member FDIC. Yeah a few times and he goes, yeah, I can help you. I can help you. Can I ask your personal question? And he says, did you get your income tax back? And I'm like what He's like, Yo, I didn't get my refund back? The mess with my money and they
tell me I'm getting lest this year. So has there something has changed in the federal income tax for us regular people.
I'm not going to call you guys, I'm going to call you guys employees.
So yes, a lot has changed, and I think that that's important.
Right.
The tax code has shifted to be in favor of the real estate investor and the business owner, right, all of the perks. And I'm sure I don't know if the guy who you were talking to, like if he had a house or what his specific situation was, But to just speak a little bit about some changes that I've seen a lot with my clients, one being people who have homes have been hit hard. Right, So I'm not talking about the landlords or the real estate investors.
I'm not talking about those people. I'm talking about homeowners, single family homeowners, and they've been hit the hardest because now taxes are capped at ten ten thousand.
Right, So where last year you were able to, you know.
Take in all of your sales tax, your sales I mean your income tax and your property tax. Now it's not even putting a dent inside of your you know, inside of your itemized deductions because it's being capped.
At ten thousand.
Yeah, I was, Yeah, And so what.
They also did was they raised standard deduction and got rid of personal exemption. So to just elaborate a little bit about that, and prior year in twenty seventeen, we would all receive standard deductions based off of your file and status if you were single head of household, right, and then you would also, in addition, get a personal exemption. Now, personal exemptions have been taken away. Standard deductions has been increased, right, So what that means is, let's just say, let me
give some numbers. If you are a married filing joint, right, your standard deduction has now been increased to twenty four thousand dollars.
Right.
However, in order for you to itemize, you have to get above that standard deduction.
So now if you have a home.
And they'll say you have your property taxes, right, and then you and your wife will have your your income taxes, your state income taxes, that's not probably going to exceed over twenty four thousand dollars once you start adding everything up.
So now it's just a.
Situation where everyone, not everyone, but for it's a lot harder for people to get over that standard deduction hurdle now. And so that's why people are getting hit hard, especially homeowners, because last year you guys were.
Eating Any tips that people that aren't business owners, that employees can do to reduce their tax liability, to save money on taxes, yeah, anything they can.
Do if you are a homeowner and you've been hit, what I would suggest is putting your property inside of an LLC because that way, with your properties in an LLC, it's now considered a business. So now that's considered a business. Now you're able to write off a one hundred percent of your CAPEX and well your capital improvement.
So if you need a new AC.
You know, as as a homeowner, you can't write that off, but as a business owner you're able to, right, So now and then there's also a twenty percent deduction. Right, So let's just say, if you know your home I don't know, let's just say in your LLC you're bringing in ten thousand dollars on your personal return, You're now given a twenty percent deduction. So now that would be a two thousand dollars deduction edition that you would be
receiving on your on your taxes. So that would be my suggestion for for you know, people that, yeah, like employees.
They own a home.
Anything, somebody can do what they don't own a home. Kind of difficult, Huh, it's difficult.
Yeah, it's difficult.
It's just the way the tax law is set up. You know, it's set up for business owners in companies. Really yeah, And your think about it is that it's I don't even want to say it's unfortunate, because it's just it is what it is, right, it is.
And one thing that I stress now more than ever is that we have to pay attention to the people that are in office and play up to that.
Right.
I find that if in school they taught us to focus more so on the taxes, then our mindset would be so different, right, because let's just use when Obama was in office.
I believe when he.
Was in office, there was a rebate for homeowners like eight thousand dollars or something like that. Right, So many people took that money and then reinvested it and purchased homes.
Right.
And so now with Trump, if you're going to purchase a home, now, maybe the time to you know, get that rental property that you want. Now, maybe the time to start that business that you want, because now you're able to get more, you know, you're able to write off more and get more deduction. So we just have to pay attention to the tax code a little bit more.
Education is the key.
And also it's a couple other things that people should be aware of too. It's a five to twenty nine plan. That's it used to be a college savings plan only, but now with the new tax law, you can use the money for anything as far as education is concerned. So you can use it for prep school, you can use it for private school, you can use it for elementary school. So that helps parents out as far as paying for the cost of education where you just don't
have to use it for college. Now you can use it for anything related to education at any point in time during child life. That's important. And then also the limit has been raised as far as how much money you can put into an IRA and four one K as well. So the limit for IRA this she is six thousand dollars four one K is nineteen thousand. So those are vehicles that you can put money in for your retirement and that that helps you save money on
your taxes as well. That's probably one of the biggest tax deductions that people have if they just are employees, because that allows you to save up to almost twenty thousand dollars in a four one K nineteen thousand if and if you're over fifty five, you can actually save even more than that. But that's a pretty sizable amount and it goes back to you know, it's in your account and it grows for your retirement, so.
Then also reduce your income for that year.
That's how Yeah, that's exactly what it does. So that's why you save money your taxes because it reduces your income. So something to be aware of. But the key is to educate yourself and to learn the political gain and you know these are these are the rules that we're in so as far as Amazon to say, like whether my personal opinion, if it's fair, if it's not, I mean, what are they supposed to do? Not do it? Right? So it's the same thing with you as an individual.
You should, you know, learn the tax code, the tax law and take advantage of it. And the thing about being a business owner tool is that you don't have to be full time. You can have a business and still work a job as well, right, and then you can still take advantage of your business, right because you have just like any other business that has, you have expenses and you have things that nature as well. So
you don't want to start a business just for tax benefits. Obviously, you want to start a business because you want to be successful in business. But that's another benefit and something to strive forward where it's like you don't have to do one or the other, you can do both. And by having a business as your side hustle or a part time job or whatever, now you're opening up the window where you can deduct more things, and you know it gives you a lot more flexibility.
My graduates from my school being.
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