Let’s talk taxes, and how to save (without screwing yourself over).
About Indestructible Wealth: I’m Jack Gibson. I’m your wealth strategist and I’m here to help you make some money. The Indestructible Wealth Podcast is for young entrepreneurs who want to make, keep and grow wealth to enjoy now, and for years to come.
Episode #31 – Four Strategies that Could Save You 10 Thousand Dollars
Welcome to the Indestructible Wealth Podcast. This is the place where we help young entrepreneurs to make, keep, and grow wealth that you can enjoy now, and for years to come. I’m your host Jack Gibson, a serial entrepreneur, founder of multiple seven and eight figure businesses, and wealth building strategist. Each week I’m going to share my tips, resources and secrets, to help you create a plan and build the life you’ve dreamed of.
I want you guys to save multiple thousands of dollars just from listening to this episode for 10 minutes, maybe 15 tops. I don’t know how long this is going to take me, but it’s not going to take long because I’ve got a golf outing at Warren dunes a really nice course down in south bend, Indiana and I want to get the fuck out of here and go golf because I’ve been in here for 3 straight days working. So let’s save you some money. I hate to say the word taxes, because I know that’s either going to put you to sleep potentially or you’re going to tune out but I guess that’s up to you. If you don’t want to save like $10,000, just from listening to this totally your call.
I’m going to go through 4 strategies that I’m very certain that if you put them into place you’re going to have a pretty substantial tax savings. It could be as much as $10,000, depending on how much money you make and what tax bracket you’re in. But these are things I don’t think you probably know about. These are called scorecard tax strategies. So why are they called that? I don’t know. Let’s just go with it. This is what my tax strategy team called them and told me to call. Okay.
So let’s hit it, right? So I love saving money. I love building wealth and I’ve said this on my platform multiple times the biggest expense of your lifetime by far is going to be taxes. Absolutely. Without any doubt, it’s going to be bigger than any other expense that you ever have, including your home, your automobile, your food, anything possible though that is going to probably be more than all 3 of those combined.
So we want to do everything we humanly possibly can to minimize legally and ethically the taxes that we’re paying. You’ve got to know the tax law. You’ve got to know tech strategy to be able to do that. I’ve paid a lot of money for this particular information and I’m passing it onto you for what? Free, but I do ask one thing back from you in return that if you find value in this episode that I’ve helped you and blessed you in some way, because I’m sharing knowledge that I’ve paid handsomely for that you just go on, give me a five-star review, put some words of praise on there that will really warm my heart and share the podcast. The only way I’m going to grow this thing is realistically if I deliver great value and great content then it gets shared if I don’t, then it doesn’t and I don’t grow it. That’s pretty much that’s the way it goes. So podcasts don’t really grow that much from advertising. It’s mostly grown organic.
So first off, this one you probably don’t know about, it’s called the Augusta rule, essentially what this rule says is that you have to have a business to do this one. If you’re an employee, this isn’t going to work, but if you have a business, then what you can do is set the business to rent 12 times a year once a month, your business can rent this is where it gets a little hard to comprehend, right? But you’re talking about entities. Your business is going to rent the use of your home. For business use. Now you’re going to say how do you get to deduct that? That doesn’t really make sense. I’m going to tell you how exactly. let’s say that you would go out, you have a corporation. That’s really, I think you have to have a corporation like an LLC or an S-corp in order to do this, maybe I’m wrong. This is something where you definitely need talk to your accountant and if they don’t know, then you potentially might want to look for a different accountant if they’re not willing to look into it and help you to take advantage of this deduction because your accountant is there for you to help you to maximize your tax savings and a lot of times they’re not scouring the tax code they can’t keep up. It’s not to say that they’re not good at what they do. It’s just really tough to keep up with all the tax on all of the intricate intricacies of it. There a lot of them are just struggling to keep up. So beyond that, doing research and all that into how to save you money, that’s not really what they’re focused on doing. They’re going to take the information that you give it to them and plug it into the return. Presto, here’s the amount of taxes you either have coming back to you because you overpaid or that you owe because you didn’t pay enough when you made too much money, which that’s a great problem to have. I love paying more in taxes because that means I made more money, but I don’t want to pay more than I should pay in taxes, get me.
So you’re going to be able to rent out your home now in a normal corporation. You would want to have a meeting of the board once a month. That’s pretty standard operating procedure for any type of corporation. So you have to rent out a space and normally you’d rent out like a boardroom or a conference room at a hotel. Say your business is based out of home where you don’t have a conference center at your brick and mortar location. So let’s say you spent the average rate, you get some quotes for various conference rooms inside of hotels around your city and the average rate is $1000 for easy math. So you’re going to get 3 quotes. You’re going to document those quotes and you’re going to take the average of the 3. That’s your number that you’re going to utilize as your rental rate. You’re going to have a meeting and it could be with your spouse. It could be with your key players. It could be with your team, but you’re having a meeting of the board at your home instead of at the conference center, you document that you take meeting notes and it’s a legitimate meeting that you have. No,you could just sit down with your spouse and you’re strategizing, how did the month go? What do we want to do next? What’s our plan for this coming month? A good framework for the meeting is what’s working? What’s not working? What are our opportunities for growth? Those are the 3 questions that would be pretty easy to go on to create your strategic minutes. So you take the meeting minutes, you documented. You’ve got the average of the 3 months or the average of the 3 quotes then you’re going to write a check from your corporate account or your business account to you personally. So $1000 is going to be written from my corporation and that’s going to be written to me personally. Now here’s where the kicker, this is where it’s awesome and this is the Augusta rule. You get to deduct that off of your business tax return. It becomes a legitimate straight line expense. So you’re going to save, let’s say you’re taxed for easy math you’re paying 50% in taxes on your corporate return. It’s not going to be that high, but it’s just for easy math. So on a $10,000 or $12,000 that you paid in rent. So $1000 a month for 12 months, that’s $12,000 and a legitimate expense that’s coming out of your corporate checkbook to you personally. Now the kicker is that you would think normally you’d have to report that $12,000 as income on your personal tax return. However, with this law, you do not, this is the beauty of this law. You get a Phantom deduction of money that you actually didn’t spend.
So in this hypothetical math situation, $12,000 deducted, you normally pay 50% in taxes. That’s a straight $6,000 that you save off your taxes that you don’t have to pay in. Boo-yah!
Now, my guess is for most of you, when you run the math, that’s going to be probably somewhere in the $3,000 to $5,000 savings. Just off this one thing that I’m teaching you right now. Okay, so that’s the first one. The second one is the higher your kid’s strategy. Now you definitely have to work with your accountant on this, but you’re going to be able to pay your children who are minors, you’re going to be able to pay them a set amount each month for jobs that they do for you to help your business. Now when my kids give me an example, when my kids were really little and they were pretty worthless we put them as models. So we did a photo shoot. We documented that we paid them to do the photo shoot and essentially not paid them but we set up two separate accounts in their name, obviously we were the ones in charge of the account but we would make payments and write a check into that account. Okay. So we’re essentially then we utilize and you have to utilize all of that money that goes into that account for expenses for your children. But here’s the kicker. When you make that payment, let’s say you pay your kids $10,000 for the year. You get to deduct the $10,000 off of your taxes so if you pay 50% in taxes bam! There’s $5,000 in deductions. However, again it’s more of a Phantom deduction because the money is going into your kids’ account and then they’re not paying taxes on that. You’re not paying taxes on that $10,000 that you paid them and then you utilize that for the little boogers which you’re going to spend money on them anyways probably, 10 times more than that anyways. So bam! you get a deduction win-win-win you get additional savings off your tax return. Boo-yah! you just put another few thousand dollars back into your pocket instead of sending it off to the IRS.
Now, let me say this before I forget one of the keys to building wealth is debt. You need to be able to have and be able to utilize debt to be able purchase things that you need, especially a primary home. You don’t want to be paying that in cash, you want to be utilizing a mortgage to do that. You generally with low interest rates you in all likelihood want to be buying your cars with debt, I do. The interest rates are so low. It’s insane to me to tie up multiple thousands of dollars in cars that I could get debt for 3% interest on almost free money. But beyond that, you want to be utilizing debt to be purchasing cash flow producing assets that are going to make you wealthier. In order to do that, not only do you have to have good credit, but you also think about this. You have to have a strong tax return. We have friends that are going to buy a new home. They deserve it. They’ve increased their income. They’re doing fantastic and the one thing that is they’re going to be able to get the deal done, but it’s making it more challenging is that they were very aggressive on their tax returns. They saved taxes. So you have to think that through you don’t want to be overly aggressive to where you write your income down so low that you’re not showing any substantial income on your tax return to where you’re going to kick yourself later because bam! Now you can’t get a loan. So you have to think about the long-term ramifications of doing this. So just want to make sure that you guys are thinking through all the kind of scenarios.
So the third thing is you’re going to use the home office expenses. Now this one you’re probably already doing but what you do is in case you didn’t know about this and you work out of your home like a home office, then you’re going to be able to deduct a certain percentage of the overall expenses that you pay on for your house. So what you have to do is measure the total square footage of your home and you can do this pretty easily if you have a copy of your survey or your floor plan, if you’re not that organized then you’re going to have to do some measurements and be able to figure out what the total percentage is but all you have to do is essentially you’re going to divide. So let me give you an example. If your home measures 50 feet across the front and 35 feet front to back, you’re going to multiply those 2 numbers, right? So that’s going to give you 1,750 square feet in your house, right? So then if you have a second floor with the same dimensions, you’d just double that number. So that’s the total square footage of your house. Then you’re going to get your actual office space number. So then that’s where you measure your actual office. Let’s say it’s 20×15, 20 feet, wide, 15 across. So that means you have 300 square feet of home office space. So then you’re going to divide the 300 square feet of your home office divided by 3,500 square feet of your total home and boom! that’s your percentage. That’s you’re going to be able to utilize your total expenses for your home. What are you going to be able to deduct? Let me hit you with them. Cable, satellite, internet, electricity, water, and sewer, any gas, oil, or propane, trash collection, property taxes, mortgage interest, mortgage insurance, homeowners insurance, homeowners association dues, any sort of cleaning service, that’s the predominantly the big part of the less, there could be a few others I’m not thinking of but I think that’s pretty much what I have here on my list. So let’s just say, you spend $20,000 on all of these things in a year or let’s do $10,000 for easy math and your total square footage of your office is 10%. Bam! There’s an extra thousand dollars that you’re going to be able to deduct off of your taxes to give you additional tax savings. So that one’s pretty cool. Here’s the kicker, you guys want all these docs that I have that helps you to calculate all this, keep track of it, there’s lease forms that you can utilize, where you can just plug in the name of your company and your name and you have everything completely documented correctly you’ve got on the rental agreements you’ve got lease agreements on that, all of the everything, all the documents that you need including like how to keep track of the minutes, there’s a minutes form. There’s a thing that you can sign to make it official. All of that stuff. If you guys want these then you have to do me something. Can you just share my podcast? How do you get where I’m going with this value exchange? Share my fucking podcast and give me a 5-star review. Now, if I haven’t given you enough value over the last 30 to 31 episodes to where I’ve earned a 5-star review, I want to know how I can get fucking better, because I would be shocked if I don’t deserve a 5-star review and a write up.
And if you really want to be super awesome you could record a testimonial of all the things you’ve learned from my platform and a minute or 2 minutes, and send that to me, email that stuff to [email protected] and then I’ll pop you back the document that you need to make all of these things happen easily. You don’t need these documents for me you can still do it, but this’ll make it a lot easier for you to make these happen and to track them and to make them Bulletproof audit proof.
Now there’s a fourth one. What do you, what is it? Because I originally only thought I was going to give you 3 of them, but I’m going to give you a fourth, and this is the 6,000 pound gorilla and I mean that literally and figuratively, the 6,000 pound auto deduction saved me $50,000 this year. make her holler. Yes!
Oh, I just scared the dog she’s underneath my desk. Every time I record it. Ah, it’s pretty awesome. Got a friend right here. Keep me company. I’m sitting here by myself, talking into a microphone with what I think is nobody listening which they aren’t right at this moment. I digress.
6,000 pound auto deduction. Here’s how this works. The IRS has a rule. I don’t know why it doesn’t make sense to me, but if you purchase a vehicle over 6,000 pounds and you use it exclusively for business for that year, you can deduct 100% of that purchase price for that year. Now, the purchase price is not the amount of money you put down. So if you utilize debt to purchase the asset, you still get to deduct the entire purchase price. So let’s say you get a car for $100,000 which I know none of you are going to do. I can do it because I’ve got 12 different streams of income coming in. And I’ve got all kinds of passive income that are funding extravagant purchases like that but most of you should not and I’m not encouraging you to do that. However, giving you easy math of what happened to me. I needed a new ride. We need a new ride for Kara, my queen, right? So we needed a big tax deduction last year too. We did really well had a huge year, things worked out well, God blessed us big time and we needed tax deductions, like crazy, like seriously bad. We went and purchased a new BMW. I don’t know what the model is. It’s really nice like a spaceship, almost a super nice ride, although we can’t figure out the heating and cooling situation that well it’s almost too advanced for us. We do have trouble hooking up. Bluetooth too as well so maybe it’s a little too spaceshipy for our non-technical savvy lives here. But at any rate we purchased the property only put maybe $10,000 down on the car. So the rest of it was financed. I’m going to utilize low interest debt when I can and so we got to write off $100,000 dollars because we bought it with 3 days left in the year. Kara drove it to staples or wherever just one business trip and then we parked it in the garage and we took a picture documented the trip, kept the receipt, documented what we did and because we only used it for business for that year we were able to deduct 100% of the purchase price off that year’s taxes which ended up saving us probably close to $45,000, maybe we’re pretty high tax bracket between federal state and all the other bullshit taxes that they give us.
So those are the plans, the 4 scorecard tax strategies. I just saved you, If you use all 4, what did I save for you? I don’t know. I guess it depends on how big of a car that you purchase which I’m not really a huge fan of getting too big of a car. So just be careful there but I just saved you guys. Let’s just call it a shit ton of cash that you don’t have to pay uncle Sam now.
So you guys can thank me and I will receive all of that. I love words of praise and hit me up on a 5-star review. I would love to hear from you, and if you want the docs, earn them, give me some value exchange and then email me the caption and take a screenshot of your 5-star review Jack and my indestructiblewealth.com. You guys have a great day. Let’s go save some fucking money on taxes.
That’s a wrap for this episode on the Indestructible wealth podcast. Before we part ways, I want to help you to take advantage of 2 incredible tax saving strategies that could help you save a lot of money. All you have to do is leave me a 5 star review – if I’ve earned it – and comment in iTunes, Stitcher, Spotify, or wherever you tune in. After you’ve done that simple step, just email me a screenshot to [email protected] and I’ll send you everything you need to save money on your taxes for years to come. If you’d like to dive deeper into your own wealth building strategy, check us out at myindestructiblewealth.com and follow along on social media. Also, please share this podcast with anyone who’s looking for guidance on their own wealth building journey. Until next time, remember our mission here is to help you make, keep, and grow wealth you can enjoy now, and for years to come.