Tax Loophole Magic

Tax Loophole is defined as an exploitation of a tax law which can lower taxes owed by the tax payer.

Purchasing a home can be defined as taking advantage of one of the most popular tax loopholes available to tax payers.

However, there can be some real benefits to taking advantage of, far less expensive tax loopholes, and benefiting greatly in tax write-offs.

Example:

Client contracted with a freelancer to build a one of a kind, search engine optimized, keyword, niche web site. The site was only 4 pages and the initial investment was less than $200.00.

Yet the write-offs, attached to this small home based business were enormous compared to the investment.

The taxpayer was able to write off a portion of the cost of maintaining his home, because of the home office deduction. However, because the first year business generated a loss, rather than a profit, he was not able to use the home office deduction. But ...., he can carry it over to next year’s return.

What the tax payer was able to establish as acceptable write-offs, were: Cost for monthly Internet Service Provider $370. Cost of basic online marketing $380. Cost for professional web hosting w/cpanel, $120.00. Cost of e-Mail marketing services $240. Cost for logo design $90. Cost for misc. online services, such as form submission services. $120. etc.

Including, depreciation for new laptop $1800 write-off, (179). Depreciation for printer $299 (179) not to mention the office supplies, postage, business cards, advertising, off line, training (in Las Vegas), software, travel for business, meals while traveling, accommodations while traveling, all legal tax write-offs for his new home business.

And don’t forget the office furniture, desk chair, lamp and bookshelves, which can be depreciated over time or used as a one time, depreciation (179)

By the time we finished adding the taxpayers annual expenses, including his second phone line and his cell phone, which was used for business, the taxpayer had $10,000 worth of expenses, with very little income for the first year.

Did this lower the taxpayer’s tax liability, as compared to the previous year? Yes.

And the taxpayers understands that he can only file a loss for 3 out of 5 years, before the IRS may ask questions as to, weather the project is a hobby or for profit business?

The moral of this story: Tax Loopholes don’t always come in fancy slick folders from high priced financial institutions. Some of the best tax loopholes in the county are right in front of you, every day.

Another client’s tax story is similar to the one above, accept, she did not have the extra cash flow for furniture, decorations, office supplies, etc.

She paid for the SEO web site and the web hosting and started “being” in business. (drop shipping) She made a profit the first year, and is now purchasing a new computer, printer, office furniture, etc.

In my book, when you can take less than $200., and start a business, that not only provides you with income, but legal tax write-offs as well, that goes into the category of tax loophole magic. The magic, is; the small investment, provides both tax write-offs, and income (or income potential,) all at the same time.

If you have owed taxes for the past couple years, you would understand the power of the above situations. Making a sincere effort, to be a valid, for profit business is the key to keeping the IRS happy.

And how does the IRS know if you are making a sincere effort to be profitable? They can tell by reviewing your expenses.

For more information on tax write-offs for web site owners, visit: http://websitetaxwriteoffs.com