Desperate Deductions

[BobDavis88 at aol.com]

In a message dated 4/21/2008 6:48:05 A.M. Pacific Daylight Time,  
formsma at gmail.com writes:


Example:  you buy a tool for $1,000.00.  It's a business expense, yes, but it 
 just cost you $1,000.00.  The tax on $1,000 might be around $150.00  (just a 
guess).  Had you not bought the tool, you would still have in  your pocket 
the $850.00.  ($1000.00 - $150.00 = $850.00).  In  effect, yes, you got the tool 
for $850.00, but you no longer have the money  that was used to purchase it. 
:-) 

 
Although John was making another  point, I want to grab onto the tax side of 
this to point out the real value of  making sure to count ALL purchases and 
expenses. It's even worse, or better,  than John says, depending upon your point 
of view.
 
Let's say you are a single person  making $50,000 per year. Even with typical 
personal deductions, the next dollar  you earn will be at what is called your 
marginal tax rate; in other words, you  are now in the 25% bracket. You are 
paying 25% on that dollar, PLUS almost 14%  self employment tax, plus maybe 1% 
state tax if you live in a taxing place like  California, plus 8% sales tax. 
Ignoring some of the other business taxes which  are part of your overhead, you 
already give back 48% of that dollar you earned.  So, if you save the receipt 
for that $100 worth of tuning pin sleeves, the  government has essentially 
paid for almost half of it. Or if you deposit that  $100 in your SEP-IRA instead 
of buying tuning pin grease, the gummint is letting  you shelter at least 25 
bucks until you retire. With a little attention to your  investments, that 
alone should grow into quite a bit by the time you retire.  And, as Frank Emerson 
points out, you need a LOT put by before you can retire.  If you want a 
retirement income of $40,000, you'll need about a million  bucks.
 
Bob  Davis



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