Desperate Deductions

[Dean May]

>>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. :-) 

 

But you do have the equity of the tool. This may prove to be more valuable
than the cash if the devaluation of the dollar continues to escalate.
Investing in tools is an investment, not an expense. It is an investment
that will not only be a tax write off, but hopefully (if done wisely) will
actually contribute to the bottom line and give you more free time. And good
quality tools will have resale value when you retire. 

 

Dean

Dean May             cell 812.239.3359 

PianoRebuilders.com   812.235.5272 

Terre Haute IN  47802

 

  _____  

From: pianotech-bounces at ptg.org [mailto:pianotech-bounces at ptg.org] On Behalf
Of John Formsma
Sent: Monday, April 21, 2008 9:47 AM
To: l-bartlett at sbcglobal.net; Pianotech List
Subject: Re: Desperate Deductions

 

On Mon, Apr 21, 2008 at 7:48 AM, Leslie Bartlett <l-bartlett at sbcglobal.net>
wrote:

 

Audits aren't fun~!  However the guy who does my taxes says the Feds are way
short on manpower, so reasonable returns have a fairly good chance of not
getting audited.  But when they do...........  I surely didn't have fun!

 

Last week, a tax expert on a national radio show said that this year the IRS
will be doing random audits.  This means that even if one has a reasonable
return, he might be subject to an audit.

 

The original question was about extra expenses in an attempt to reduce tax
liability.  Generally speaking, unless you were going to spend the money
anyway, it would be better just to pay the taxes.  Otherwise, you're just
spending money.

 

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. :-) 

 

The same principle applies to deducting things like interest on a mortgage.
Yes, you can deduct that.  But you're better off not  having a mortgage, and
just paying the taxes you owe.  To put it another way, if you had the cash,
you wouldn't go out and get a $100K mortgage just so you could claim the
deduction.

 

One relatively simple thing you can do is to increase your deductible miles.
Trips to the bank, or to buy supplies are deductible.  Anything business
related.  Vacation type trips are not deductible if you tune a piano on the
way, however.  I think you have to spend at least half of the time of a trip
for it to be a legitimate business trip.  So my trip to my in-laws in
Nebraska where I'll tune their piano is not a business trip if I just tune
their piano.  If I spent half my time there doing piano work, it would be,
however.

 

Since I live in a rural area, I make the most of my miles.  My grocery store
is 35 miles away.  I usually shop after working there, but if I have to make
a special trip for something, I'll also stop by Fastenal or Lowe's to buy
something business related.  Instant mileage deduction ... as long as it's a
legitimate business expense.  Keep meticulous records.

 

Other things you could do is set up a home office.  I have mine in the
house, and deduct a portion of my utilities for the home office.  It's
better to have a separate room or office building (something small and
unattached to the house, or a room clearly separated from the rest of the
house).

 

Do you deduct your cell phone expenses?  Get a cell phone dedicated to the
promotion of your business, list it on your biz cards, and you can deduct
that.  Have a web site?  Deduct it.  Need a new computer or printer?  Buy it
for your business, and deduct it.  Just be sure to use it mostly for
business.  It's a legitimate expense.

 

You might find some good help at this site: http://www.taxhelponline.com/

 

 

-- 
JF 

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