First of all please understand that I have no problem paying taxes and yet like anyone I wish to keep as much of my hard earned money as possible. I started a small business earlier this year and recently incorporated it. It has done much better then expected and I want to protect the assets in the best way possible. Any help from knowledgeable professionals will be greatly appreciated!
2006-12-14 18:57:32 · 4 answers · asked by montanamike 2 in Business & Finance ➔ Taxes ➔ United States
A tax shelter is something that you invest in the will give you a tax savings today and hopefully an economic benefit in the future.
I wold hope that when you incorporated you also elected S-orp status. Otherwise you have complicated your life and if you don't plan properly will be subject to double taxes. Once when the corporation has taxable income and once when the corporation distributes that income to you as a dividend.
Charity is not a tax shelter because you give your money away in order to save taxes but the is no anticipation of an economic benefit in the future. Giving to charity is great but do it for charitable purposes not tax savings. $1 to charity will save up to .45 cents on each dollar given and you are out of pocket the other .55 cents.
I think the best tax shelter is to maximize your retirement plan contributions. There are many ways of doing this that will allow you to provide for your future. You can do SIMPLE IRA's, SEP IRA's, profit sharing plans, pension plans, defined benefit plans or something as simple as a regular or Roth IRA.
Each $1 put into a plan for yourself can save up to .45 cents in taxes and the .55 cents is in an investment account that will grow tax deferred for many years.
2006-12-14 21:57:36 · answer #1 · answered by waggy_33 6 · 0⤊ 0⤋
A tax shelter is a scheme or plan to generate artificial losses or deduction to improperly avoid or defer the payment of taxes. A very wise man once said that if you pay your taxes you own your money. Just ask Wesley Snipes who killed all those vampires in Blade but got caught by the IRS for investing in illegal tax shelters.
You want some legal tax shelters, buy some depreciable equipment for your business before year end and claim a section 179 deduction, open and fund a qualified retirement plan, prepay some expenses that you will incur in the first months of 2007. Now that your business is thriving, it may be time to upgrade to an accountant you can trust and not just someone with a worse golf handicap.
2006-12-14 20:34:14 · answer #2 · answered by mattapan26 7 · 1⤊ 0⤋
In terms of legal tax shelter there are always two debatable best ways that could be interchanged depending on your needs.
The number one tax shelter.
The best tax shelter is still charity this is true for all types of businesses anywhere in the world. There are requirements on charity tax shelters like Receipt to be submitted to the Government and this Receipt is issued by the foundation or charitable organization that you are giving to.
Donating can be also in kind: Buying a new laptop? Donate your - 3 year old Laptop to a Foundation. Giving a gift to yourself is not charity but look at Legal tax shelter number 2 for that.
The number two legal tax shelter.
Asset Management: Buying future assets that reduce your profit margins for investment purposes. This can be an investment to yourself or your company that you can use and also turn a profit when using it. Examples: Insurance for your company or yourself, Furniture, Computers and extreme cases: power suits and paintings for the ultra rich. Key note is to increase your operational expenses and make you money work for you.
You will notice companies will spend so much on the end of the year to increase operational expenses.
2006-12-14 20:39:59 · answer #3 · answered by makatimerchant 2 · 0⤊ 0⤋
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2014-09-24 08:33:34 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Yes, he said he will lower taxes for 95%. However printing money causes inflation which will probably eat up any tax reduction.
2016-03-13 07:07:57 · answer #5 · answered by Anonymous · 0⤊ 0⤋