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Spending Pre Tax Dollars

November 29th, 2009 Joe Leave a comment Go to comments
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Rules of the Rich

The Poor pay taxes then pay their bills with what is left over.  The Rich pay their bills and then pay taxes on what is left over.

Knowing the significance of this is HUGE!  If your income at your Job is $50,000 you will pay around $10,000 in federal taxes.   Yes there are deductions that lower that amount but for simplicities sake we will stick with these numbers.  That means you take home $40,000 before  state taxes and bills.

What can a business save you?

The Rich own businesses that makes $50,000 a year and they pay all their bills
Cell Phone $1200 a year
Auto $3600 a year
Insurance $3000 a year
Food $5000 a year
Office Supplies $500 a year
Computer $1000 a year
Internet $600 a year
TOTAL $14,900

Many other things can be expensed but we will stick with these items for now.  Many of these have limits set by the IRS.  These numbers are for example purpose only.

So we have a business that makes $50,000 – $14,900 in expenses = $35,100 profit (this may bump you to a lower tax bracket but I will use 20%)

Total taxes owed by the business before any allowable deductions is $7,020.  That is a tax savings of about $3,000!

That is a 6% raise!

$3000 is just the beginning there are many other expenses from your daily life that if you were in business could possibly transition into business expenses.  Plus there are all kinds of tax credits and deductions that change almost every year.  Currently you can get special credits for adding “green” options to your business.  You can get credit for buying a Hybrid vehicle for business use.  There are all kinds of great tax benefits of owning your own business.

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