One of the questions I frequently get from new business owners is, “What can I deduct?”
The answer is “It depends” or “Just about anything.” It all depends on the business you have.
Rather than talk about how to find the deductions for your business, today I want to talk about how to use the deductions to find your business.
Where do you spent your time? Where do you spend your money? When you have time off and after all the day-to-day living chores are done, what is it you really want to do?
Turn THAT into a business.
That’s how you turn your deductions into a business, instead of looking for deductions for your business.
Bobby loved to sail. He spent his weekends on the ocean with his sail boat. During the week, he worked hard at his construction company. The money he had, went into his hobby…sailing.
Since he spent so much of his time on the water, he soon became known as an expert at sourcing equipment and figuring out how to fix various problems. His friends said he should become a boat carpenter. As much as he loved his sailboat, he realized that if he became a contractor all he was doing was trading one job for another.
It didn’t make sense to him.
But then we started talking about the 3 types of income: earned income (service), product/info sales and affiliate/referral income. He didn’t need more earned income other than maybe eventually looking for ways to make it more leveraged. System would do that.
What he needed was sales of products or info and affiliate/referral income.
With that in mind, he started making videos about different aspects of sailing. He talked about the best type of equipment and how to maintain and fix it. People started subscribing to his YouTube channel. He monetized it with his own ads and sold ad space to others. He got people to sign up for his paid newsletter. He found a source for some specialty products in China, which he imported and rebranded.
He’s being a little more selective with his construction work. He has income from product sales and affiliate income. He pays a lot less in taxes because all of his sailing expenses are now deductions for his sailboat accessory company.
Where do you spend money right now? If you have a business already, is there a way to turn it into an expense that is ordinary and necessary to the production of income? If so, it’s a deduction.
Otherwise it could be a deduction for a new business.
In the first post of “Steps to Success” at https://web.facebook.com/groups/DianeKennedysUSTaxGroup/?ref=bookmarks, I talked about how to quickly set up a business. Once you’ve done, you have a business! And that means you have deductions.
Of course, don’t stop there. Every week or so I’ll post another Step to Success as part of https://web.facebook.com/groups/DianeKennedysUSTaxGroup/?ref=bookmarks. After you start your business, it’s time to grow it and refine it. In these steps, I’m just talking about online businesses.
They are the fastest, easiest and most efficient way to get a business started these days. And they’re mobile. That’s becoming even more important as people move to a digital nomad or location independent lifestyle.