NYNistler

Tax Deductions for a Family Business

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I'm ignorant when it comes to anything other than basic tax regulations, so I'm looking for input on tax deductions for a family business. My wife and I started a new business that is registered as an LLC that we will operate as a 50/50 partnership. The revenue generated by this business is extra money in our pockets. Can we put part of this money into a retirement plan in a way that it is a legitimate deduction that lowers our adjusted gross income when it hits our 1040? 

 

I also asume that if I purchase a new pickup for the business and use it for business purposes only, it would also be tax deductable, and further lower our adjusted gross income on the 1040. Any other clever and legal ways to use the extra money in a way that benefits us but does not increase our adjusted gross income?

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Buy the truck personally and rent it to the business. Pay taxes on your money and make retirement investments roth ira’s.

 

Not converting to a roth when they came out is going to kill me when I hit MRD age if I live that long.

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2 mins ago, MakoMike said:

How much money do you expect to make? Writing off a $50,000 truck should put a big dent in your business income.

Year one, probably around $50k, with increasing profits each year thereafter.  I'm sure the pickup would make a big dent, but it also needs to be depreciated, from what I understand. It's not something you can claim a 100% deduction in one year.

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1 min ago, NYNistler said:

Year one, probably around $50k, with increasing profits each year thereafter.  I'm sure the pickup would make a big dent, but it also needs to be depreciated, from what I understand. It's not something you can claim a 100% deduction in one year.

There are rules about how much depreciation you can write off in year one, but for some situations it is 100% write off in year one. You should look up the rules to see if you qualify.

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3 mins ago, MakoMike said:

There are rules about how much depreciation you can write off in year one, but for some situations it is 100% write off in year one. You should look up the rules to see if you qualify.

If that were to work, that takes care of year one, but it wouldn't provide a long-term advantage to our tax situation, which is why I'm wondering about contributions to a retirement account. Contributions to a retirement accout also seems like it would be easier to control our adjusted gross income and ensure we don't hit the next tax bracket.

Edited by NYNistler

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7 mins ago, MikeMc said:

You should consult a tax advisor. 

I will eventually. There are a lot of intelligent people lurking in SOL. Last time I had a question about finances, I got some really good out-of-the-box suggestions here. It allowed me to see things from different angles that the typical tax advisor or financial planner would not think of.  If nothing else, it arms me with information to share with the advisor to review options.

 

The fact is, I got better advice on SOL that from a finance-related forum that I am on. I found the fish people to be smarter than the money people!

Edited by NYNistler

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8 mins ago, NYNistler said:

If that were to work, that takes care of year one, but it wouldn't provide a long-term advantage to our tax situation, which is why I'm wondering about contributions to a retirement account. Contributions to a retirement accout also seems like it would be easier to control our adjusted gross income and ensure we don't hit the next tax bracket.

There are limits on how much you and your wife can contribute to a retirement plan and get a tax deduction for those payments, If you're not already covered by a retirement plan and don't have a 401K at you regular job, look up what the limits are on an IRA.

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5 hours ago, NYNistler said:

I will eventually. There are a lot of intelligent people lurking in SOL. Last time I had a question about finances, I got some really good out-of-the-box suggestions here. It allowed me to see things from different angles that the typical tax advisor or financial planner would not think of.  If nothing else, it arms me with information to share with the advisor to review options.

 

The fact is, I got better advice on SOL that from a finance-related forum that I am on. I found the fish people to be smarter than the money people!

 

No doubt this place is a wealth of knowledge on many different subjects. 

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5 hours ago, MikeMc said:

You should consult a tax advisor. 

Yup. I have had an S Corp for 27 years and couldn't function without my accountant. With her I have made it through IRS audits because she makes sure I am doing things right. Well worth the expense. And it's a write off!

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KEEP EVERY RECEIPT!

My recommendation is bag the LLC and go S-Corp! Write offs are a plenty. Open a SEP IRA in which you contribute as much as $58k yr.

The truck deal people were taking about is still in effect. You can write the entire amount off this tax year. Follow it closely for next year. That benefit may expire. 
As mentioned, talk to your accountant. He/she will guide you. 

Edited by Markushook

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1 hour ago, Markushook said:

KEEP EVERY RECEIPT!

My recommendation is bag the LLC and go S-Corp! Write offs are a plenty. Open a SEP IRA in which you contribute as much as $58k yr.

The truck deal people were taking about is still in effect. You can write the entire amount off this tax year. Follow it closely for next year. That benefit may expire. 
As mentioned, talk to your accountant. He/she will guide you. 

If it’s a llc it can’t be a sub s, at least without making an election.

Edited by MakoMike

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