7 Steps to Reduce Your Taxes by 10-40% Permanently These tactics can can add up to millions in tax savings over a lifetime.
By Tom Wheelwright Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
To help entrepreneurs maximize tax savings and build long-term wealth, every school should be teaching their students these seven tax tips in financial education classes. As millions go back-to-school, the majority never learn this information in home economics and business courses. And because taxes are anyone's greatest expense, a class on this topic should be required for every high school and college student.
What most people do not understand is that simply by increasing your understanding of the tax code, you can learn how to legally reduce your taxes by 10-40% permanently, which can add up to millions in tax savings over a lifetime.
Related: 5 Ways That Billionaire Warren Buffett Pays a Lower Tax Rate Than His Secretary
The good news for entrepreneurs is that small business owners get many more tax breaks than other individuals, especially with the 20% pass-through deduction in the new Tax Cuts and Jobs Act of 2017. And if you are an employee, start a business on the side so that you can take advantage of all the tax incentives that the government provides.
So let's take a closer look at seven topics that schools should be teaching you about taxes in financial education classes:
1. The government wants you to open a business
What many do not realize is that the government actually wants you to start a business to fuel the economy. And by starting a business, you will receive tremendous tax breaks for money that you invest in your business for job creation, real estate investments, equipment expenses and more.
2. Small business owners should set up a business entity
One of the first things an entrepreneur should do is set up a legal entity for your business. By setting up an S-Corp, C-Corp or partnership, you will significantly increase your tax savings. Bottom line: If you have the right entity setup, you'll pay less tax.
3. You can deduct almost everything, legally
If your expenses have a business purpose, and you have the right documentation, you can deduct almost everything you do. This includes your travel and meals for business purposes that are ordinary and necessary. And if you're having dinner with your spouse and talking about business, it can be a write-off!
4. Hiring a bookkeeper and accountant is a must for every business owner
You must own your numbers as an entrepreneur, small business owner and/or investor. To stay on top of your finances, hiring a great bookkeeper and accountant should be a top priority. Set up a chart of accounts and a system for communicating with them. Remember that a bookkeeper is in charge of making sure records are accurate, and an accountant is in charge of analyzing those records for tax and business planning opportunities. And then schedule regular meetings with both your bookkeeper and accountant to evaluate your cash flow versus waiting until tax time.
5. Assets must create income to be an asset
Your company and investments should be regularly generating positive cash flow. If your company is upside down, it's time to re-evaluate the company's priorities. Based on cash flow, you can determine whether it's time to expand, add partners, get investors, sell or shut it down as a loss.
6. You should review your cash flow numbers every day
To stay on top of your company's financials, you want to regularly review what funds are coming in, and what is going out as part of your daily schedule. And keep your cash flow charts simple because if they're complex, you won't do it.
7. Tax incentives can change your life — and the world
And while most people cringe when they think about taxes, the tax code can actually do a lot of good. By taking advantage of the tax incentives provided by the government, you will not only build your long-term wealth; you can also change the world. By inventing something that solves a problem, you can positively impact your life and others.
So what every school should really be teaching students this fall is how to set up a tax savings strategy that lets you build long-term wealth. Instead of memorizing things in school that don't really matter, students should learn practical tips for maximizing tax deductions. Anyone can start a new business and deduct expenses for creating jobs, investing in equipment, inventing new products, investing in real estate, and even writing a book!
Related: 9 Airbnb Rental Tax Deductions You Can Take for Your Vacation Trips
And once you apply these seven tax and wealth tips, you can make way better decisions, make way more money and pay way less taxes. You'll not only build long-term wealth for you but also fuel the economy and help others achieve their financial dreams. These tax tips are really that important, so spread the word!
