Looking to save in taxes? Start a small business, here’s why
Taxes. We all know what they are but have you ever heard the word used like this:
“She knew the ordeal to come would be a tax on her strength.”
In this sentence tax is referred to as a heavy demand on the persons strength, so therefore taking away from their strength.
Sadly, that is exactly what monetary taxes are doing to the strength of someone’s income. Although taxes are good because they can help provide us with useful services they can also be very destructive to individuals. The reason: Taxes are a persons largest lifelong expense and biggest erosion of their wealth. That’s why it is very unfortunately that most of society has come to accept this as a normal part of life and fail to do anything about it in their lifetime. There is a solution though, and it’s a good one.
The solution is simple; start a small business to supplement your income and create larger tax deductions so your bottom line does not suffer so much come tax season. In fact, in some cases it is possible to earn a refund on your taxes if you have enough small business tax deductions throughout the year.
Typically what most receive at the end of each calendar year is a record from their employer showing how much they earned during the year, as well as how much taxes they paid, and any other contributions they were required to pay into. Most people are paying a pretty large portion of their income to the government in taxes, in Canada this can be as high as 50%, whoa!
With a small business startup on the side those same employees who are paying large amounts of their income to the government in taxes can now use their business expenses as tax deductions, so when filing season comes they claim their regular wages along with any business income and expenses. When the business expenses are larger than the business income this can actually create a tax refund for the individual. For example, if Joe earned $45,000 a year (and has paid $10,000 in taxes for the year) from his day job and on the side he owns a small business where he earned only $500 for the year but had $6,000 in legitimate business expenses, his total taxable income would be lowered from $45,500 to $39,500 ($45,000 + $500 – $6,000). Since Joe has already paid $10,000 in taxes he would receive a tax refund from the government because they overtaxed him. They taxed him on $45,000 instead of his real income which was $39,500.
For Joe, the beauty in owning a small business was that within the $6,000 in business expenses he had during the year he got to go on two business trips for educational purposes, sign up for an online business course, deduct some of his household expenses because he worked out of his house most of the time, and claimed any meal and travel expenses he incurred when he had business meetings away from home. And the overall result was that he began the process of creating a strong business which he expects to earn more money with the next year, all while getting a refund from the government instead of seeing the money absorbed into the system and seeing no direct benefit to himself.
With small business taxes, this is just scratching the surface, but the general message here is to illustrate how beneficial it can be to own your own small business. I personally have leveraged my taxable income this way by starting a small business with USANA, where a large portion of my business expenses are also high quality health products that I get to consume each month. For me it’s always been a win win situation (I’m saving on my taxes and getting healthy at the same time!), and as my USANA business grows I will continue to take advantage of the tax opportunities I have from owning a small business, and you should to!
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