Tax 101 - What are Write Offs Deductions and expenses - Flying Wheels

being a business owner is an absolutely wonderful thing sometimes the government wants you to do well and wants your business to succeed it's good for the economy and for that reason they help your business thrive including me getting a free truck in this video i'm going to explain how tax deductions and write-offs work as well as how the government is giving away free money to help you grow your business and if you don't have a business why it's so important that you get one set up this is what it's all about let's get started hey good morning good afternoon good evening depending on what time you're watching this my name is craig from flying wheels welcome to my flying wheels youtube channel today is a really really fun video because i get to buy myself a new truck one of my dream trucks one of the trucks i've been looking for for quite a long time now i own a 98 f-150 to plow my car dealership with i also own a 2011 duramax 2500 gmc sierra denali so my accountant called me the other day and said craig it's time to buy a new truck for your company you need to go out and go shopping and get yourself a new truck because you made too much money last year what a problem to have today i'm going to go to the auction we're going to search through a bunch of trucks now in this video i am not giving you financial or tax advice because everybody's position is different than mine we each have our own positions you should each have your own account to tell you what you can and cannot do now in this video i'm gonna explain expenses to you business expenses and write-offs i'm gonna explain all of that i'm not a multi-millionaire i didn't make millions and millions but according to your taxes your net profit is what you're taxed on so i'm going to explain what that means when you're a business owner and you make a hundred thousand dollars well you have business expenses incurred to make that hundred thousand dollars so if i bought a truck for eighty five thousand dollars and sold it for a hundred thousand dollars i didn't make a hundred thousand dollars i only made fifteen thousand dollars that's a hundred thousand minus eighty five thousand but there were also expenses to repair that truck so let's say it cost me a thousand dollars to repair that truck to sell it for a hundred thousand dollars now i own it for eighty six thousand i sold it for a hundred i only made fourteen thousand dollars so instead of getting taxed on a hundred thousand dollars i only get taxed on fourteen thousand dollars that's business taxes explained very very briefly now please please please do not take my financial advice as your own seek an accountant to confirm everything i am not giving you tax advice i am not giving you financial advice everything i do i ask my accountant before i do it hey can i go buy a truck hey can i spend this much money how much money can i spend can i buy a trailer or is it better for me to pay a tow truck company now let's say this tow truck company right here if i pay them all year 100 a week 400 a month 4800 a year i write them a check that is an expense because i have to get those cars back to my shop now if i buy a trailer for 4 800 and i use it for three years i actually just saved myself some money and i got to expense the trailer just like i would expense the tow truck company and i own a trailer and every single year after my first year i'm making money or saving money because i'm not spending 400 every single year on transportation services now according to certain tax codes your vehicle has to be a certain weight i'll explain that at some point in this video i don't really want a 1500 because i'm going to be towing and i'm going to be plowing so i really want something heavier more like a 2500 or a 3500 now talking about inventory versus a company vehicle unless you're a car dealer you don't really have to worry about your inventory vehicle but i'm selling cars that's inventory i own those vehicles they're expensible but they have carrying costs i own them and i can't write them off it's a cost of goods sold when i'm purchasing a vehicle for the company a company vehicle that's different i'm going to register it i'm going to insure it and it's going to be completely separate it's not something that i have for sale you also have to think of the purpose of the vehicle that you're writing off that you're using as a business expense this 392 hemi charger i would love to drive it now if i wrote my name all over it and i was a commuter vehicle that i was traveling a lot possibly this could be a business expense that again you'll have to seek an accountant for but you'll notice a lot of ceos will expense their mercedes or their bmws because they're using it for work related purposes so here we have an 07 power stroke that's the 6 liter 128 000 miles fisher plow setup three plug two plug this really is too old for me i have no purpose for this this one comes with the plow this is an f-150 a little too small for me but here we go an 11 f-350 137 000 miles this is pretty nice hilarious yeah this might do it i love these weathertech mats great for the winter and the leather i would like a backup camera from plowing though i don't really want to be backing into things and just have a beeping at me all the time from these i'd like to see where i'm going instead of just having backup sensors but wait there's more 08 f250 73 thousand miles fischer plowed this would do the trick good tires on it excuse me but i really want leather interior i'm gonna be using this thing a lot and again who's to say a carpenter can't buy a better hammer right a better hammer a better tool makes the job a little bit easier sometimes so this doesn't really have all the options i think i'm going to need for business purposes now it also depends on the purpose of the vehicle for the company a lot of companies will lease vehicles for their employees to drive if they're on the road salesmen it makes sense for the company to pay for their vehicle as a lease they make that monthly expense that monthly expense is deductible so if the employee is making the company say four thousand dollars a month it's worth them to spend 180 a month on a lease on a mazda 3 or something and it escalates from there depending on the purpose of the vehicle depending on the value of the employee but those monthly payments for the company for the employee to make that company money is also an expense now don't get me wrong i can't go buy my wife a minivan and then expense it write it off as a company car it's not she's using it for personal reasons i can't expense that part of my inventory and it's for sale it's different it's not expensible but it is for sale so when i sell it i'm going to deduct the repairs essentially she's test driving it for me she gets to review the car tell me what's wrong tell me what's good about it helps me sell the car because i know that specific car and then when i go sell it to a customer say this is the car my wife was driving she knows the car she loved the car i put my kids in it makes the customer feel better so it's an incentive for the buyer to purchase it knowing that i know that vehicle better than the other vehicles on my lot so there's fine lines there's great areas that you need to know in the business without crossing the wrong line again seek an accountant don't use my advice ask the accountant i'm just bringing up questions and suggestions for you to ask the accountant now let's ask the question craig what if you're making monthly payments or paying it in full well if i'm making monthly payments those payments are deductible if i'm paying in full i'm going to get to that in a few minutes i'm going to read this to you right now and explain this in better detail according to the irs website so let's break this down according to tax code in section 179 what is section 179 deduction most people think it's a 179 deduction of some sort of mysterious or complicated tax code but it's not essentially the irs code allows businesses to deduct the full purchase price of qualifying equipment and or software purchases or finance during the tax year that means if you buy or lease a piece of qualifying equipment you can deduct the full purchase price from your gross income it's an incentive created by the us government to encourage businesses to buy equipment and invest in themselves years ago this was considered as the suv tax loophole or the hummer deduction because hummers were so expensive that's why so many business owners were driving hummers when they originally came out here's how it works in the past when your business bought qualifying equipment it typically wrote off as little at a time through depreciation in other words if your company spends fifty thousand dollars on a machine it gets to write off ten thousand dollars a year for five years now while it's true that this is better than no write-offs at all most business owners would really prefer to write off the entire equipment purchase price for the year they buy it and that's exactly what section 179 does so what are the limits of section 179 it does come with limits and there are some caps on the total amount 1 million 50 000 for 20 21 and limits to the total amount of equipment purchased can be two million six hundred and twenty thousand dollars who qualifies all businesses that purchase finance or lease new or used business equipment during tax year 2021 should qualify what's the difference between the deduction and bonus depreciation bonus depreciation is offered some years and some years it isn't right now in 2021 it's being offered at a hundred percent now let's say i want to go buy a 2021 corvette stingray convertible how do i expense that as a car dealer well i mean with marketing purposes these are these are the really great areas that you have to seek an accountant's advice for but as a youtuber guess what i can do write my name all the way across it make videos for it constantly do upgrades for and every time i do an upgrade i make a video that makes the upgrade and the parts expensible that is a horse of a different color now i'm talking as a youtuber not as a car dealer when i get you to watch my videos because i bought a brand new corvette and youtube pays me well that corvette got you to watch me and i got paid based on the corvette now that corvette is expensible right that's the purpose of the corvette i bought the corvette so you'd watch my videos and then i got paid on it and then i could put my name all over it flying wheels youtube.com flying wheels everyone i drive by sees this flashy 21 corvette and they say who's this oh flying wheels youtube what's that then they go to my flying liz youtube channel it helps grow my channel marketing 101 right this would do it we have the fischer push plates 250 000 miles 32 000 on motor stage 3 turbo tuner egr delete no cats bulletproof well this thing's pretty crazy but i really feel like i want class more than muscle truck well the day is over and here's my new toy 68 000 mile duramax denali crew cab with a stainless steel fisher plow this thing is nasty this is what i needed this fit my budget i am so pumped pearl white 20 inch wheels that made me very happy that is exactly what i wanted so i want to discuss business expenses versus personal expenses let's say you're not a business owner let's just say you work a regular job and you get a regular paycheck when you get a thousand dollars a week minus your taxes let's say your take home is seven hundred dollars well you're doing an at home project and you need to purchase a hammer that hammer is twenty dollars well that hammer comes out of your own pocket that comes out of your earned income your seven hundred dollars from the week now let's say you're a carpenter you just got a contract to build a deck for somebody well you need a hammer well without that hammer you're not going to be able to build that deck and if you're not able to build that deck you're not able to make any money therefore you need that hammer to make money that makes your hammer an expense so before you get paid on that deck you can go and buy yourself a hammer and it is a business expense it's a write-off because you need that hammer for your business to make money now here's a perfect example my trailer doesn't take a two inch ball it takes a 2 and 5 16 inch ball so i need a new ball for my truck well i'm not gonna go use my personal money to buy a ball because it's for the company so the company needs to purchase a ball to tow the trailer with the new truck to get it to the shop right because without any of that i can't make any money therefore the ball is a business expense so i'm going to use the company credit card to purchase the new ball to use on my new truck to tow the trailer to go make some money therefore all are expensive because they're all for business purposes take that one right there and for you to make money your business needs to make money so that hammer is an expense so let's say you make a thousand dollars off of that deck well the hammer cost you 20. so you actually made 980. well how much did the materials cost how much was the pressure treated wood how much was the framing how much was the nails all of those things are expensed as well well the same goes for my business if i need to tow a vehicle i need a trailer now a trailer might be twenty five hundred dollars now you might say craig that's a lot of money how are you going to expense that now look at it this way yes i need a trailer to tow cars back to my shop to sell them to make money for my business to be profitable an expense the tongue i need to tow the trailer to get the cars back to sell the cars to make money now i need a truck to tow the trailer so the truck is an expense because i need to tow the cars back to my shop to make money now when it snows at my shop if i can't move the cars around the parking lot i can't make money so guess what i need a plow so the plow is a business expense because i need the plow to push the snow so i can move the cars around so i can sell the car so i can make some money so much easier because they have the right tool for the job so here we go i got my ball i got my tongue everything's expensible and i use a credit card 100 of the time to track my expenses and that's not the only reason i use a credit card do not use your debit card ever i accumulate points by using my credit card that's number two so at the end of the year i rack up a ton of points which either pays you back in cash or travel points depending on your credit card now i paid off every single month because i don't like to accumulate debt so every single month i pay off the credit card i don't spend what i can't afford that's number three so two or three two is the point three is i don't spend what i can't afford number four number four is because using a debit card gives everybody access to your money they give access to your cash why use your cash when you can use it on credit use other people's money and then pay it off at the end of the month plus with scams i don't know i think i just stopped plus with scams if you use your debit card and somebody gets a hold of your account shut up if you use your debit card and somebody gets a hold of your account that's your money your take now your bank doesn't care as much about your money as much as they do about their money so if you use a credit card using their money and something goes wrong or some fraud all you do is hit fraud alert the bank challenges it and you're taken care of because it's not your money if you use a debit card it comes out of your account it's your money it's going to take months for you to get your money back trying to fight with the bank and figure out who stole your money so there are lots of reasons to use a business credit card more than just your debit card and lastly i'm not sure what point i'm at but at the end of the year i basically just hit print and it categorizes all my expenses for me depending on what credit card you have now let's go back to the carpenter who's to say that carpenter can't go buy a 50 hammer is the irs gonna say mr craig you're not allowed to spend fifty dollars on a hammer you can only spend twenty dollars on my hammer no it's the same with the vehicle who's to say i can't go buy a better vehicle according to the regulations of the irs now this is the stuff you're going to have to seek an accountant with you can't just go and buy everything and expense things do not use me as your account or financial or legal or tax advice this is just suggestions and you should refer to your accountant before doing any of this i don't want to be responsible for the tax man but is the tax man allowed to say craig you can only drive a single cab 4x4 that weighs a certain amount and under a certain price no because what if i need to tow a three-car trailer that might necessitate a 3500 pickup instead of a 25 or a 1500 pickup that's more money right well that is an expense now let's say i'm only making twenty thousand dollars this year that money is still your money if you're the business owner so why would you go spend fifty thousand dollars on a truck when your company only made twenty thousand dollars this year yes your truck is an expense but it doesn't financially or fiscally make any sense so everything has to be within reason because you're still paying for it the government isn't buying your truck for you you're still making the payments on so there you go taxes 101 how to run your business and use expenses in your favor that truck deducted another 50 000 off of my income for the year that's how it saved me all that money now i don't get taxed on that truck i actually get to use it as an expense according to my account and i'm going to verify all of that which you should do as well so this video just saved you at least the cost of a college course because i learned this in life lessons and i use examples for you guys i hope it was entertaining i hope it was informative and educational if it was do me a favor give me a thumbs up and make sure to subscribe if you have not subscribed yet i'll see you all later in the next [Music] [Music] you

Channel: Flying Wheels

Views: 79,425

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Id: z36qLA0of3Q

Length: 17min 56sec (1076 seconds)

Published: Fri Feb 12 2021