Bob Gauvreau shows how to claim tax deductions earlier by prepaying coaching or other deductible expenses at year-end, and how real-estate purchases let you deduct repairs plus depreciation. The strategy cuts your tax bill without extra spending.
Okay, let's talk about accelerating tax deductions. And this is probably one of the most popular questions that I get asked is, Bob, what can I spend money on now to save me tax money? And that's ultimately what we're trying to do, is get as much deductions in as we can to reduce our tax bill. Now, I want to walk you through one of my concepts, though. It's not necessarily about spending money just to get a tax deduction. And here's why. If we think of income at $100 and our tax rate is 20%, for simplicity, if we pay tax on that $100 at $20, we have $80 left. If we spend money. If we spend that $100 just to get a tax deduction, we're saving $20 overall. So instead of having $80 left after paying the tax, we have $20 left, which is our tax savings. Which one's better? I would go with the $80 left in my account. Now, it doesn't mean that we don't need to spend that $100 on an asset or something inside our business to help grow or to better prepare ourselves for the future, if those are necessary. 100%. We want to look at strategic timing. Strategic timing is what's going to accelerate our tax deductions for us. And I'll give you an example, and it'll probably get you thinking about how you could do this in your own business. One example would be, okay, I'm going to invest in this new coaching program. I want to. We're going to head into 2024 here very soon. I want to actually take this course or bring on this coach in 2024. It's going to cost me $50,000 to invest in this. It's investing in me. It's the best investment I can make. Absolutely right. But if I don't invest that until 2024, I'm not going to get that deduction until 2024. I want it now in 2023 where I can save tax money. So instead, what we do is we buy it or we invest in it at the end of 2023, and we actually put that money in there. We expense it in 2023. We get access to the tax benefit of that now, and then we use that coaching service to blow up our business in 2024. So that strategic timing is accelerating that deduction and getting us access to that tax savings a year before we actually should. Here's another example for you. If you're in a business that's Making a lot of money and you've got a lot of excess cash. One of the things that we can do is start investing in assets like real estate to look at getting upfront deductions. So what would an upfront deduction look like? If we're going to invest in property and, and let's say it's a million dollar property, it's going to cost us 100 or $200,000 in down payment money. But what happens is we buy that property, it needs a whole bunch of work. If that work is replacing something that's already in existence, like flooring, like a furnace, like a roof, like windows, and we're essentially just replacing it, not replacing it with something better or newer or more expensive. Expensive. For an example, putting a steel roof on versus an asphalt roof. If we're just replacing an asphalt roof, that is a replacement, not a betterment, we get access to that deduction immediately. So inside your business, if you've got that type of investment, it will accelerate deductions for you to get access to that quickly. We also get depreciation on real estate. This is just one example of how we can accelerate deductions up front and then that asset will appreciate. Likely because you put that money into that asset, it's worth more. You can likely get more rental income, so it's got more future value. But we get access to that accelerated deduction now and we get to pay essentially more tax down the road as that property continues to earn income. So there's a few ideas for you on how to get and access strategic deductions earnings earlier, accelerating that to help save your tax bill this year. And then we look at next year and say, how do we do the same thing?
What Is Proactive Issue Flagging, And Why It Catches Cash Problems Before They Become Crises?
