Just because something is a business expense, doesn’t mean it’s free money. The goal in every business should be to keep your money, not spend it. Spending money to save it on taxes is not actually keeping your money. Yes, you want to minimize your tax liability, but most importantly you want to maximize your profit.
Before you justify a purchase because it is “a business expense”, ask yourself these questions:
● Is this a need in my business?
● Is this an actual business expense that I can write off?
● Do I have an emergency fund that can cover 3-6 months of expenses in my business?
● Would that money be better spent maxing out my IRA or 401k or giving bonuses to my team? There are tangible and intangible benefits related to investing in your business that you need to also consider.
● Understand your marginal tax rate. This is the rate of tax charged on a taxpayer’s last dollar of income. It also determines the value of a specific deduction for a taxpayer.
Remember that if you are unsure, you can talk to a tax specialist for advising on expenses.
Contact us today, if you have more questions!