I love this time of year as I put together all my business profits and expenses spreadsheets for my accountant and evaluate my numbers.
However, for most people, paying their annual income tax is a shocking experience.
As you well know if you are an employee, the taxes are taken off your pay check before you get paid. In some cases, that reduction can be as high as 30-50% of your gross income. Imagine. Half of your pay check taken away by the Government!
“The best way to teach your kids about taxes is by eating 30% of their ice cream.” – Bill Murray, Actor and Comedian
So for a lot of us, reducing our taxes is something we seriously want to do. There are different ways of doing that but I want to focus on one, that not only reduces taxes but helps you build a second stream of income at the same time.
Let me begin with my story.
After living in Italy for 3 years, our family returned to Canada. My husband was a military officer, and we had been re-assigned to the National Headquarters. We had young children and I wanted to be home with them, as I had been in Italy, as they were starting school in a new city.
At the same time, our financial advisor recommended we take action to reduce our taxes and besides certain investment strategies he suggested we start a home-based business. Like many government workers, my husband was being taxed heavily.
“Home based businesses are one of the fastest growing segments in our economy, and that trend will only continue, as the age of the corporation, which began barely a century ago, gives way to the age of the entrepreneur.” – Paul Zane Pilzer
The reasons he suggested the home-based business were as follows:
1. You are in control.
When you are running your home based business, you are in control. You are in control of when you work, and how often you work. This flexibility gave me the lifestyle I wanted. The flexibility to be home with the children, when I wanted to be, while at the same time generating income.
2. You work from home.
Okay so this is obvious. But it certainly has its benefits. You don’t have to travel to an office by car, bus or other means every day. We all know that for a lot of people this can be a long stressful commute. Benefits include being able to deduct household expenses from your taxes for heating, house including heating, office equipment, office supplies, telephone costs, etc.
3. You can deduct home-based related expenses from your taxes.
I think this is the most important aspect when it comes to reducing your income taxes. Benefits include being able to deduct household expenses from your taxes including costs for home maintenance, heating, insurance, office supply, office equipment, office renovation and telephone, etc.
4. You can deduct business related costs.
With running any business there are costs related to starting it up and keeping it going. These costs are also deducted from your gross income, thus reducing your overall tax assessment. These costs include professional fees for lawyers, accountants and advisors, promotional expenses including business cards, advertising, graphic design, customer give aways, etc.
5. You can deduct your transportation costs.
If you are using a vehicle for business, then the cost of operating that vehicle (either partially or fully) can be deducted. This means leasing, maintenance, fuel and insurance costs. As well, other transportation costs may be tax deductible as well. For example, travel to conventions, training sessions, etc.
6. You can deduct your training and business development costs.
Depending on the home-based business, any training that you need to help your business may be tax deductible as well.
It is always important to speak with a professional as to what you can claim or not claim as a deduction for home-based business. Tax laws can vary between countries, states and provinces. So make sure you get the correct advice.
To further support what my financial advisor was saying and at almost the same time, my sister introduced me to network marketing. She realized I wanted to stay home with the children and saw this model as a way of doing that while at the same time, earning my own income. Thanks to her, I took her advice even though I knew very little about the network marketing business model. Furthermore, the financial investment to get into this business was low and the return on investment was quick.
Today, I consider myself a network marketing professional. I have reinvested the income I have made from it into real estate income generating properties, wrote a book about it, built a nation-wide business with team members from across Canada, and of course, reduced our family taxes on a annual basis.
So if you are being taxed heavily as an employee, then maybe its time to start your own home-based business.
It’s never too late and the benefits are definitely worthwhile and worth the effort!
“The worst thing you can do in this economy, is get a second job! The best thing you can do is start a home-based business!” – Dave Ramsey, North America’s Trusted Voice on Money