You may have heard that the new tax plan is a war on the rich against the poor and middle class. The rich are the only ones who benefit, and the poor and middle class pay the price.
That’s not exactly true.
It’s actually a case of business owner versus employee. It just happens that most rich people own their own businesses. The poor and middle class are more likely to work as an employees. It’s not because someone who is poor seeks out a job instead of a business. It’s because a successful business will make someone richer than a good job. And with a business, you control your future. You control your pay. You control when and how you work. You aren’t at the mercy of the bad decisions of bosses who don’t understand the business like the workers do.
It’s not rich versus poor and middle class. It’s business owner versus employee.
Which side do you want to be on?
If you had a business, even a side business, you could take a deduction for your home office. In that way you pick up some of lost deductions like mortgage interest and property tax, plus get deductions for utilities, HOA dues, insurance, repairs and the like which normally wouldn’t be deductible. Mortgage interest and property taxes are largely lost deductions to most taxpayers under the changes in the new tax plan.
If you pay state taxes on the income of your business, it will be deductible. The state taxes you pay personally are not deductible. The cost of business items such as your cell phone, ISP, vehicle, travel and business meals will be deductible. These are not deductible if you don’t have a business.
Medical costs will no longer be deductible for individuals. But they are deductible if you have a business set up the right way, as a business deduction.
You may be worried that you’re losing a lot of deductions under the new tax plan. Chances are, you’re right. You’re going to lose deductions. But if you start a business, you’ll probably get those deductions back.
How do you survive the new tax plan?
Start a business.
Now, let’s talk about the one challenge the IRS may give you.
They may say you have a hobby not a business. If you have a hobby instead of a business, you have to pay tax on any income you make, but you can’t take advantage of any losses. Unlike a business, if you have a bad year and lose money, tough. There is no deduction for a loss. The loss won’t get rolled forward into another year.
The key is NOT to be considered a hobby. I will introducing a new step-by-step guide to make sure your business qualifies for all the tax breaks and what to do once you get that coveted status. Please go to http://www.ustaxaid.com/free-tax-updates/ to sign up for email alerts and the latest in tax strategies. Plus you’ll get your copy of this valuable info at a special introductory price with some bonuses you won’t want to miss.
There are four main categories that the IRS will test you on. Remember, if you pass it, you get all the benefits of a having a business. Flunk it, and you don’t.
Category #1: You must operate like a business.
Category #2: You must put in sufficient time and effort to show you are serious about the business.
Category #3: You must have past successful business experience. If you don’t, you’ll need a coach, mentor or advisor who does.
Category #4: You must demonstrate profit. This can be the tough one, but there are some strategies you can use to demonstrate you have a profit MOTIVE, if not actual profit right now.
The above, of course, is a quick summary and doesn’t go through the step by step process to make sure the IRS will accept your business. There will be more on that soon!
Today, though, if you don’t have a business. Start one. It could be a side business. It could be a part-time business. Just start!