A business owner or athlete can deduct any dollar spent if they can explain its connection to the business. Personal groceries aren't deductible, but they are if bought for a company event. Keep records to survive an audit.
Here's the question. How do I combine my personal and business life to maximize tax deductions? So the question is coming from a scenario where the person we were talking to is a professional fighter. And this, this advice would work— well, it's going to work for everybody. But specifically, if you're talking about a scenario where You are the business, right? Like a professional athlete would fit into this scenario. How do you combine that? The question is like, well, I mean, I feel like maybe there's more write-offs that I'm missing. And, you know, we likely agree with that scenario because most of the time when you talk to an accountant, they are going to tell you no, whatever. Hey, can I do this? Can I do that? No. Instead of saying, well, let's Let's stop and see if we can figure out how it could be yes. So really, what we just have to understand here is, what is an actual tax deduction? The tax code uses a bunch of words like ordinary expense, a necessary expense, a helpful expense, or an appropriate expense. But the thing is, I mean, All the expenses that we spend on the business are helpful and necessary and appropriate and ordinary. But we have records and experiences where the IRS says no, that, that is not a justified tax deduction. So in order for us to not be confused, we've simplified it. And here's the way we explain it. If you're spending a dollar and it's related to your business in any form, shape, or fashion, and you could explain how it's related to your business, then it's a tax deduction. Now, that being said, it's always great to check with a CPA, maybe who works for you and not the government, who is willing to say, let's see how that could be a yes, because there are certain exceptions and there's certain things that are definite no-nos. For example, your personal Mortgage payment. If you own the home or rent the home, the payment to your landlord or the payment to your business— so your business— the payment of your mortgage to the financial institution, that's never a business expense. Now, that's not to say you can't write off your business. Feel free to check out some of our other blog posts on the Augusta Rule and corporate rent. That'll save you $3,000 to $6,000 in taxes if you go listen to that. Also, your personal groceries are never a tax deduction. Now, that being said, it doesn't mean buying groceries at a grocery store is never a tax deduction. It just means the personal groceries that I consume are not a tax deduction. I could have an event at my house. I could have an event here with my company where we go to the grocery store. In fact, we're going to do a retreat in a couple of weeks where we rent a VRBO, and we bring in meals, we cook meals. That's a company event. That's a tax write-off. But my personal groceries are a no-no. So with that being said, any dollar, is it related to my business? And if the answer is yes, then it's a write-off. And now this is where the question comes in. Well, how do I know if it's related to my business? Because you have the obvious expenses, If I'm a professional athlete, the gear that I wear is going to be an obvious write-off. The training that I do to be in the physical condition that I need to be in to compete, since I'm my brand, that's also going to be a write-off. But sometimes the other things, maybe they're not as obvious, especially for business owners. Driving, say, to my office, Okay, that's clearly business purpose in my travel and my miles. But what if I'm going to the store to pick up something like maybe a book that's going to help me be a better business owner? So the book is a business expense, the miles are too, even though it might not directly be generating revenue, it is helping me improve my business. Um, personal cell phone. You know, do you need that to be accessible to your clients, to your sponsors, or to whoever it may be? Would you have the cell phone if you didn't have a business? Same with personal travel. Is the personal travel related to my business somehow? Am I going somewhere where I can make a business purpose first before I start spending money, before I choose to go there personally? These are all questions that you can ask yourself, and if the answer is yes, then you need to be writing it off. Now, if you have any concerns about it, it is always great to get advice on your specific scenario with an accountant so that they understand their scenario, your scenario, and can give you guidance on that. Because right now with this video, I can just give you some general ideas. But until we know your specific situation, I couldn't be able to tell you yes or no specifically on things because, you know, a trip to Southern California for one person could be a business trip and for someone else it couldn't be. So, and that's the same with cell phones. Someone might not have a cell phone if they didn't have a business, in which case they bought the cell phone for the purpose of being in business. Some people even buy second numbers. So those would be write-offs, but it doesn't always mean 100% of the time that you can write off your cell phone. Um, and that's really in any advice, a lot of times 100% absolute statements, uh, are something to be questioning if you ever hear them when it comes to the tax code, because the tax code is 76,000 pages long. Um, they're littered with exception after exception after exception. So I hope that helps. The easiest way to know if you can combine your personal and business life is to ask yourself the question, as I'm spending the money, is this related to my business in any form, shape, or fashion? And can I explain, or could I explain if asked, how I thought it was related? Because again, worst case scenario is you take an expense, you're able to articulate it if you were audited, but the auditor says you're not allowed to do that. Worst case scenario, they make you claim that or like take off the expense, in which case you might owe a little bit more in taxes. And that's fine. You would pay it because you felt like you had a legitimate tax deduction to take. And that's why you gave them a good explanation. Hope that helps. Remember, profit is a choice. Have the courage and wisdom to choose it.
