Top 5 Tax Write-Offs For LLC’s

welcome back to taxes made simple today we're going to go over llc's we're discussing today top 5 write-offs for llcs [Music] now there could be a number of reasons why you decided to start an llc maybe you're a new business owner maybe you just started earning 1099 income and someone told you you need some type of entity structure maybe you're a truck driver maybe you even want to invest in a rental property and you want to get an llc for asset protection well if that's you today today we're just going to go over the top five tax strategies for llcs to put you in a better position number one start up an organizational cost as a new business owner chances are you are going to have startup costs and organizational costs startup costs and organizational costs could be in the form of marketing advertising maybe you've already established your website or maybe you spent some money on getting some training and some coaching before you decided to establish your business anytime that you have cost before you're considered operational they're considered startup costs and operation costs and you as a business owner are able to take five thousand dollars in your first year as startup cost or organizational cost let's just say that you spend more than five thousand dollars on getting your business set up any expense that exceeds five thousand dollars is amortized over the course of 180 months so as a business owner you still get to benefit from some of those costs that you had that exceeded 5 000 be very mindful of this when you file your tax returns that you make sure that you include all of your startup costs and all of your organizational costs for your small base business number two the home office deduction in the year of 2020 we were faced with a pandemic if you're watching this video right now chances are you probably lived through it so let's talk a little bit more about the tax deductions you can take as a small based business owner one of the biggest tax write-offs is the home office deduction most small based business owners are working from their home so how do we go about taking this home office deduction well it's simple if you have a designated space in your home or a designated room in your home that you're doing business in that is strictly for business you can take that space and leverage that space as a home office deduction here's how it works you start off by getting the square footage of your home office space or your home office once you have that square footage you're going to divide your home office space or your home office buy the entire square footage of your entire home when you do this calculation you are going to receive a percentage this percentage will be your home office percentage based on the utilities that you have in your home utilities could include your water cable electricity and gas fill these all go into your home office expenses anytime that you are making repairs or maintenance or doing improvements to your home office these can also go down as a part of your home office expense this is another way for business owners to benefit from some of the changes that they plan on making in their home as a part of their home office number three the vehicle deduction as a business owner you could travel to meet with your clients and chances are your vehicle is going to be used for your business how do we go about making sure that that vehicle that's used for your business is leveraged the right way there are two different ways in which you can determine to take a vehicle deduction inside of your llc one way is by taking the mileage when you are a business owner you have the ability in the year of 2020 to take 58 cents per every single mile you drive for many uber lyft and truck drivers mileage is extremely important because they are tracking their mileage on various different apps called mile iq or even quickbooks has a way for you to track your mileage on your cell phone being able to track every business mile you take is important so that you're getting all of your deductions just think about it 58 cents for every single mile you drive that can add up extremely quickly the second way for a business owner to take a vehicle deduction is by depreciating their vehicle inside of their business a vehicle depreciates over the course of five years if you purchase a vehicle that's 50 000 this would result in a ten thousand dollar write-off each year if you were to take a straight line depreciation there are different methods in how you can depreciate a car you can choose to do a double declining method that allows for you to accelerate a portion of your depreciation so you are getting a bigger write-off with your vehicle as opposed to waiting the entire five years to take all of the 50 000 there's also the code section 179 that allows for you to take a business deduction for a vehicle that weighs over 6 000 pounds all in one year so if you happen to purchase a vehicle that weighs over 6 000 pounds you can ride off the entire vehicle in your business through your llc in the same year reducing your taxes immediately let's discuss marketing and advertising no business runs without getting customers through the door if you're in business whether you're selling services or you're providing products you're gonna need to market those services for those products and you're gonna need to advertise them marketing and advertising are two of the biggest expenses that most business owners have because it's how you're able to create consistent income within your organization when you are having marketing and advertising going out whether it's flyers website seo this is a business expense that you get to take every single year through your llc when you are spending money on marketing and advertising these are immediate expenses these expenses do not have to be amortized over time or depreciated over time so rather than having to take marketing and advertising as an expense like a vehicle over five years you are able to write off your marketing and your advertising in the exact same year that you spend the money on your marketing and advertising as long as they're not considered startup organizational costs you will have no problem expensing a hundred percent of your marketing and your advertising through your llc and number five turning your llc into an s corporation when your business grows to the point when the benefits outweigh the cost to switch your llc to an escort you will eliminate a 15.3 of self-employment tax that many llcs and sole proprietors pay into not to mention you will be able to take a deduction when you decide to place yourself on payroll because an s corporation requires that the business owner pays themselves out of their business it's one of the many benefits to being a business owner being able to control the income you pay yourself and control the amount of income your tax gap one of the many benefits to being in an llc is that you can choose to tax yourself as an llc you can choose to tax yourself as an s corporation or you can choose to tax yourself as a c corporation however one of the benefits to taxing yourself as an s-corporation is eliminating the self-employment tax and being able to take a payroll tax deduction as a shareholder if you have any questions on these five strategies that you can leverage as an llc feel free to schedule a free consultation with me by visiting the link in the bio if you've enjoyed this video i'd love for you to give me a thumbs up and hit the subscribe button so i can work on more videos like this for you to help you reduce your tax bill in real time i look forward to seeing on the next video take care

Channel: Karlton Dennis

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Length: 8min 11sec (491 seconds)

Published: Fri Dec 25 2020