How to Pay No Taxes with a Schedule C

you probably already know this but rich people know Schedule C like the back of their hand tax forms is like something you just want to get it over with and as far away as possible today is not going to be a deep dive into tax forms and tax laws or anything because it's quite complicated I would defer specific information to your Tax Advisor today is more of an overview I just want to get you guys to know what kind of tax write-offs you can do on your schedule C it's like the whole network thing I talk about once you start tracking your net worth your net worth starts going up if you have deductible expenses you start thinking okay I can spend this amount here and actually deduct it so you can tailor your spending towards your business expenses and get the maximum write-off this video is brought to you by MooMoo the commission free trading app open up an account and deposit a hundred dollars and you can get a lot of freebies including five free shares of stock 100 worth of cash rewards you can redeem towards purchasing 1000 dollars worth of stock and one free share of c3.ai which right now is worth over 43 dollars in itself if you deposit a thousand dollars you can get 10 free additional shares of stock deposit five thousand dollars you can get either one free share of Tesla or Google stock check out my affiliate link down in the video description below here is the schedule C itself profit or loss from business Schedule C Forum 1040. the very beginning is just your business information that you materially participate in it this is a very important factor the IRS has seven tests to see if you materially participated in this business now if you're working and you get a W-2 and then let's say you have a little side gig and you're like oh I want to write in a Schedule C well first you have to determine if it's a hobby or if it's an actual business let me just say that even though they write out all the rules there's a little bit of room for interpretation one of the tests is if you've worked on this business for over 500 hours that year so if you do it every single week roughly part-time then you can sort of consider it a business but this is not the only test you actually have to conduct it like a business it has to do with careful accounting if you have profits that's coming in you write all that down if you have any kind of expenses you write all that down as well versus if you're connecting like a hobby you don't keep any kind of Records you're just doing it for your own fun and most importantly you're not really doing it for profit or any kind of intention for profit let's say you sell on eBay recreationally and you just kind of offload some of your old stuff this is not a business it's a hobby because let's say you buy a camera for 500 and then you sell it off for 300. you actually took a loss of 200 I mean 500 hours is one of the tests so if you ever get audited you better be able to prove that you're running this thing like a business there are more nuances to this but most of time you kind of know yourself if it's run like a business or not if you intend to make a profit for example you have to so purpose of buying Capital Equipment in order to generate profits and all this Capital Equipment obviously is not for yourself maybe you're buying like packaging equipment you're setting up shop you're buying Machinery so many times I personally think it's pretty obvious if you're running it like a business or not but if there is any kind of uncertainty you can go on the IRS website and you can try to differentiate if it's a hobby or a business through their document the first part over here is income that's easy you just add up all the profits that you get one way that I like to think about all this is when you're working at a job and you get a salary you might be taking losses when you're selling on eBay and you're like oh I wish I can have a schedule C and then write off all these losses from the profits the thing is if you have no profits at all you cannot write off these losses try to have a side hustle that actually generates profit I highly suggest doing this because it diversifies you from your job income in case there's any kind of job loss you still have some kind of stream coming in the bigger a stream the better and sometimes if the volume of the stream is at least half of your wage income then you might start thinking hey maybe this hobby thing is getting pretty serious you can actually quit your job and Go full on 100 into your side hustle once you have a couple thousand dollars of profits you can think about okay how can I actually spend all this to write down the profits therefore you have your deductions and here is the cream of the crop in Schedule C as a self-employed person I look at this part two expenses line item 8 through 27 I look at it as money all of this is free money this is your best friend it it gives so much back everything that you can legally put here you don't have to pay taxes on if you can somehow find ability to squeeze your everyday expenses into this business expense now I'm not saying cheat or anything right I'm saying you have to find a way to make your business expense overlap with your personal expenses sort of take over your personal expenses yeah advertising if you advertise on Google ad words not very interesting here because obviously this is obviously a business expense car and truck expenses maintenance costs and things for your business of course you have to be conducting business activities when you consider these types of expenses commissions and fees these are things that you pay out for example let's say you're selling something and you have to pay a commission to someone else contract labor I don't really use this the depletion and Section 179 expense deduction Section 179 is really great there's different kinds of depreciation models and you have to keep track of how you depreciate your Capital expenses but in the end it lands in this item number 13 and this gets deducted from your profits so let's say you made three thousand dollars worth of profits and you actually can decide where you put your expenses so let's say you keep really good books and you know how much profits you make you can go well I have this much profit let me make some Capital expenses and reinvest towards my business and all of a sudden based on your expenses you made zero dollars therefore you pay zero in taxes employee benefit programs if you're a sole proprietor or a single LLC person you don't have employees so there's no benefit programs here if you have a recording session and you have to buy insurance for the crew that is on site all of that gets deducted in other words most of the expenses that you have to put towards generating your income all of this becomes deductible let's say you have business loans and you're paying interest well all of that interest and this can get deducted in your schedule C as well mortgages count as well if the entire place is for your business you got legal and Professional Services maybe you hire someone to make an ad for you or you hire a lawyer all of those or deductible office expenses you know by the time I'm reading all of this you might go wow basically almost everything is deductible copy paper you buy a printer you got pension profit sharing plan rent or lease if you rent a very expensive lens or camera or like a giant lawn mower or something all of that is deductible as well repairs and maintenance towards your business equipment you got travel and meals over here these are most interesting because it can get overlapped with your personal life if you travel solely for pleasure then you have to foot the entire bill you have to pay taxes on it 25 30 but if you turn into a business on let's say Instagram and you can post social media posts and you actually earn money through this so then when you travel you can write off these travel expenses because you're doing that in order to generate more content on your Instagram if you are or a food blogger you take pictures you take videos of the food you can write off those meals as well there's a little gotcha here for the year 2021 and 2022 you can actually write off 100 of your business meals but for 2023 you can only do 50 of your business meals there's also utilities expensed as part of your business there's wages that you pay your employees and then there's other expenses what's highly interesting here if you want to write off your home it's important to have dedicated work areas you just kind of fence this off and say this is work only in trying to expense your home you actually have to say how many square foot you're using for business purposes also obviously the larger area that you dedicate towards business use the better and I had a question about health insurance the insurance premiums is tax deductible so you see in my expenses I had like 400 some dollars every year this amounts to about five thousand dollars so this gets knocked off straight off of the profits no taxes paid on it whatsoever in terms of travel let's say for me right I just went to Taiwan in Japan and I'm very very interested in going there but every which way I'm actually making videos as I go then you can start writing these expenses off I tailored this video just for people that are working at a salary job thinking about going self-employment these deductibles actually more than pays for itself even though you have to pay for your own health insurance it's very expensive on top of that you have to pay for self-employment tax but because you have such a powerful Schedule C that you can deduct a lot of things off of you end up having to not pay as much taxes if you know how to really really use these deductions once you start using the schedule C for a while you start to go well I have this and this to do for personal reasons and then maybe you don't want to do it you just want to do like all business related stuff if your entire life is business related well all your expenses becomes tax deductible I hope this video helps you guys out on getting more on top of your side hustles trying to make a profit in it and then in turn you can deduct a whole bunch of things on your schedule C thanks for watching this video don't forget to give me a like And subscribe for more foreign [Music]

Channel: BeatTheBush

Views: 2,891

Keywords: personal finance, financial independence, FIRE, beatthebush, beat the bush

Id: tLn9jLwAQa4

Length: 10min 37sec (637 seconds)

Published: Thu Jun 15 2023