ACCOUNTANT EXPLAINS: How To Pay Less Taxes | Khalil Dabaja x Jaspreet Singh

"what you should do is try to find ways to generate losses not monetary losses but losses on paper ways in doing that are investing in real estate especially if you're under $150,000 in income because if you're under $150,000 in income you could benefit from Real Estate losses up to $25,000 where if you're making more than $150,000 in income you can't tap into those losses you'd have to carry them forward"

"even if you're an employee you should have a side hustle you should create a business and what's interesting is there are no limitations on form Schedule C so if you're a sole proprietor you have this passion of yours that you know what I want to continue working out at my job I enjoy working for my company but at the same time I have a passion for helping others or possibly getting into a business that's similar uh to a hobby you can generate income from this business but more importantly generate losses by starting to focus on your branding your social media your uh equipment or some uh maybe technology expenses that you'll need for this hobby your business and what's interesting is you can use that upfront investment let's say you invest $10 to $15,000 in this startup you can use that loss in year one to offset much of your W2 income"

"if you're serious about doing business you definitely want to take a more of a legal approach and create a legal entity to separate yourself personally from the business"

"but it's important to note that schedule C's are the most heavily audited uh tax forms and that's another reason why the IRS they they put this microscope on self-employed individuals where self being self-employed is just maybe the introductory entrance in becoming a business owner"

"we had this client who was filing his wholesale business on his personal tax returns and his net income would be close to a million dollars a year and we advise the client that hey you're overpaying about $30,000 a year in self-employment taxes you've been a sole proprietor filing your business on form Schedule C for almost 10 years like you've paid over a million dollars in self-employment taxes than you had to and all you needed to do was file form 2553 to El to be treated as an escort"

"as long as you are actively pursuing creating a business and you document through itemized receipts you can take that loss"

"your cell phone is deductible as well the business uh portion so let's say 50% of your cell phone bill you use your phone to text or speak with clients 50% of the time you can take a $50 deduction if if your phone bill is $100 a month"

"if you could document your cell phone bill your automobile expense if you're driving client to client or customer to customer uh or your picking up some supplies if you could document the supplies or even the meals that you have with potential clients or leads or vendors that you meet with the insurance some travel is also deductible if you could document this"

"now when you're creating content when you are using your your range your refrigerator your countertop you are having clients or customers come to your house and you're you're feeding them or you know giving them that a culinary experience mhm that's considered a business deduction so you're tell you can tap that"

"here's why because there's still personal usage of this kitchen and if you're going to expense this kitchen through depreciation if you sell the home you're going to have to add back that expense that you took okay so but it could be beneficial in the short in the short run"

"vehicles are written off over 5 years leasehold improvements like the moldings that you see here are written off over 15 years so if I buy $50,000 car yes right and I was going to write off 100% of the car I can't take a $50,000 like if I made $100,000 this year I bought a $50,000 car I can only take a $10,000 deduction this year $10,000 next year $10,000 after that is that what you're saying unless you tap into bonus depreciation in Section 179"

"for example for your cupcake business you buy a fleet truck right and it's advertised jre's cupcake when you're not going to drive this vehicle to a wedding you're not going to drive it hanging out with with your buddies you are this business vehicle is 100% business use you even have an oven in there okay and you are selling you're going you know you started off with your neighbor but now you're driving around the neighborhood uh locally and now you're selling your cupcakes door too that company vehicle is 100% deductible"

"and you could take bonus depreciation in year one it used to be 100% but now it's phased out to about 80% so if the vehicle cost you $50,000 you can take 80% of that as a deduction in year one and then capitalize the rest over 5 years"

"the way you protect yourself from getting in trouble is number one you document it you get the receipts and you take notes on the receipts of why you bought it and what is bought what you bought it for"

"track all of your business income and expenses by creating a separate bank account okay it could be a personal bank account that is separate from your other personal bank accounts where you pay all of your expenses from"

"once you have a $1,000 or $1,500 tax liability at the end of each year you must pay estimated quarterly taxes even if you don't have even if you're a W2 employee"

"we need an accountant once you're making more than $250,000 in gross revenue that's where it makes sense to invest in a team where now you don't have time to track your revenue and your expenses and your assets and your liabilities"

"you have a $10,000 let's call it one rental property and you have a $10,000 income but your depreciation is about $10,000 it wipes out your income so on paper you have no income"