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In order to maximize 2023 tax deductions:
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1Your bookkeeping must be up to date ASAP, the sooner and the cleaner the better
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2Work with us to complete or review your bookkeeping before the end of the year to find deductions
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residential clean energy property credits
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irs.gov/pub/taxpros/fs-2022-40.pdf
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Energy Efficient Home Improvement Credit is generally eligible for a $1,200 annual credit, but some property is eligible for a $2,000 annual credit. The two categories of property can be combined to produce an annual credit of up to $3,200
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exterior doors (30% of costs up to $250 per door, up to a total of $500)
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exterior windows and skylights (30% of costs up to $600)
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insulation materials or systems and air sealing materials or systems (30% of costs)
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Make PTE (passthrough entity tax payment) before the end of 2022
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1If you made the $1,000 minimum payment by 6/15, you can pay the remainder of the PTE before 12/31 in order to claim the 2022 deduction
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2You must have a reasonably close estimate to your 2022 taxable income before the end of the year so that you can pay the correct amount of the PTE
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HSA - Health Savings Accounts (The tax savings Tripple Play)
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1You must first have a high deductible health plan (HDHP or HDLP)
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2This plan (account) lets you save money, tax-free, in an account to use for health related expenses.
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3Some people choose to save this money in this account year over year to grow a tax-free health savings account
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4The money in this account grows tax free
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5When you spend money from this account on health expenses, there is no tax on the "dsitributions" and it doesn't count as taxable income
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Step by Step
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1You have to switch your health plan to a HDHP
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2You must fund this account before the end of the year
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Should I put money into a ROTH or 401K?
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1This really depends on your current cash flow and investment and wealth building goals. I can't tell you that you should always put money into a tax free or tax defered account, because it comes down to if you need the money right now or not, and what other investment oppertunities you have right now
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Roth
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1Most people don't think about putting savings into a ROTH because you can only put $6,000 a year and zero if you make over $200k married joint or $129k single. https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2022
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2The best way to put money into a ROTH is the use the "mega backdoor" where you first put money into your 401k, then convert it.
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3Info on Mega backdoor here: https://markjkohler.com/the-magic-of-the-mega-backdoor-roth/
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401k - The best retirement account for S-Corp with no employees
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1If you do have employees, you have to match them the same as you match yourself.
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2https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits#:~:text=You%20may%20contribute%20additional%20elective,cost%2Dof%2DlivingPDF%20adjustments
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3The best kind of 401k account to get when you don't have employees is a SOLO 401k. They are usually low cost, only a couple hundred bucks to set up and maintain. You can get one with all the large brokerages (fidelity, Schwab, Vangaurd, etc) E-Trade allows you loans against the 401k which is really convenient.
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Plan to set up the plan before the end of the year to minimize problems... although you can set it up as late as 4/15 the following year
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SEP vs 401k
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1SEP plans are good for sole props (non S-Corps) because all of your income is self employemnt income outside of an S-Corp
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2SEP plans are not good for S-Corp because in an S-Corp, they are limited to 25% of your W2 income, which we want to try to keep low
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3You can save up to 25% of your self employment profits into a SEP account
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4These are easy to set up and can be opened at most brokerages
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5SEP is better when you have employees because you don't have to contribute to thier accounts and you don't have to match
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Buying Rental Properties
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FIVE PRIMARY TAX BENEFITS:
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1TAX-DEFERRED GROWTH
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2CAPITAL GAIN TREATMENT UPON SALE
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3TAX WRITE-OFFS AS A SMALL BUSINESS AND POSSIBLE FLOW-THRU LOSSES THAT CAN OFFSET OTHER INCOME
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4TAX-FREE CASH FLOW FROM RENTAL INCOME
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5EXIT STRATEGIES SUCH AS 1031 EXCHANGES, OPPORTUNITY ZONES, AND CHARITABLE REMAINDER TRUSTS
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Short term "Air BnB" vs. Long Term Rental Properties
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Paying estimated taxes throughout the year vs. paying a penalty
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1Eliminate the word “friend” from your vocabulary. From now
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on, these people are sources of business, so start talking
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business and asking for referrals over meals and beverages.
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2Hire your children. This creates tax deductions for you, and it
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creates non-taxable or very-low-taxed income for the children.
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Also, wages paid by parents to children are exempt from
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payroll taxes.
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3Learn how to combine business and personal trips so that the
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personal side of your trip becomes part of your business
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deduction under the travel rules (for example, traveling by
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cruise ship to a convention on St. Thomas).
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4Properly classify business expansion expenses as immediate
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tax deductions rather than depreciable, amortizable, or (ouch!)
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non-deductible capital costs.
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5Properly identify deductible start-up expenses ($5,000 up front
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and the balance amortized) rather than letting them fall by the
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wayside (a common oversight).
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6Correctly classify business meals that qualify for the 100
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percent deduction rather than the 50 percent deduction.
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7Know the entertainment facility rules so your vacation home
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can become a tax deduction.
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8Identify the vehicle deduction method that gives you the best
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deductions (choosing between the IRS mileage method and
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the actual expense method).
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9Correctly identify your maximum business miles, so you
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deduct the largest possible percentage of your vehicles.
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10Qualify your office in your home as an administrative office.
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11Use allocation methods that make your home-office
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deductions larger.
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12If you are married with no employees, hire your spouse and
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install a Section 105 medical plan to move your medical