10 Tax Strategies for Schedule C Taxpayers: What, How, and Where
Parts of this article are published with permission from Bradford Tax Institute, © 2021 Daniel Morris, Morris + D’Angelo
At Morris + D’Angelo, we pride ourselves on providing you not only with information on what Tax-Saving Strategies to use but also with the knowledge and experience on how to implement these Tax-Saving Strategies.
With the resources in this article, we go one step further—we show you where in the tax return you should record these tax breaks (Website download).
In this article titled “10 Tax Strategies for Schedule C Taxpayers: What, How, and Where”, we provide you with 10 Tax-Saving Strategies that put money in your pocket. We then show you how these strategies work for you and where to record them on your Schedule C.
Learn how to implement the following 10 Schedule C strategies today:
- Deduct Your Health Insurance Premiums with a Section 105 Plan
Use the Section 105 plan to make your health insurance a tax-favored business deduction.If you hire your spouse as an employee in your business, you may reimburse the employee-spouse for family medical expenses, turning those reimbursements into business expenses that are deductible as employee welfare benefits. You cover your employee-spouse with family coverage, and that’s how you, the employer-spouse, get your coverage.
- Employ Your Child
Employ your under-age-18 child to make taxable income disappear.When you hire your child, you shift taxable income from a higher tax bracket to a smaller, or even zero, tax bracket. Schedule C taxpayers are also exempt from FICA when they employ their children who are under age 18. Additionally, each child can earn up to the standard deduction amount without paying any federal income taxes.
- Employ Your Spouse
Employ your spouse without paying him or her a W-2 wage.Instead of paying your spouse wages on a W-2, you can reimburse his or her medical expenses. This not only reduces your FICA tax expense but also allows you to use medical expenses as a deduction against your business income.
- Rent from Your Spouse
Rent your office, even your home office, from your spouse to save self-employment taxes.If you own an office building or other assets, a rental arrangement with your spouse could significantly cut your self-employment taxes by enabling you to move income from Schedule C onto Schedule E. Schedule E, unlike Schedule C, does not give rise to self-employment taxes.
- Home Office Expenses
Establish that an office in your home is your principal office, to increase your vehicle deductions and also turn personal home expenses into business expenses.The home office deduction allows you to convert a portion of your nondeductible personal expenses, such as utilities and insurance, into deductible business expenses and to depreciate a portion of your home as business property.
Having another office outside the home does not preclude you from claiming the home office. In fact, if the home office is the principal place of business, the mileage driven between the offices transforms from nondeductible commuting miles to deductible business mileage.
- De Minimis Fringe Benefits
Give yourself Flowers, Fruit, and Books as Tax-Deductible fringe benefits.Under the De Minimis Fringe Benefit Rules, your business deducts the cost of flowers, fruit, books, and similar items given to you or your employees under special circumstances. The recipients (both you and your employees) receive these fringe benefits tax-free.
- Vehicle Expenses
Combine the home office and a heavy SUV, crossover vehicle, or pickup truck to grab big deductions this year.There are major tax savings with the heavy vehicle and home office combo. The heavy vehicle produces quick deductions. And a home office that qualifies as a principal office eliminates commuting miles, which can dramatically increase a vehicle’s business-use percentage.
- Domestic Travel Expenses
Design a business trip that includes some personal days—days you treat as 100 percent business even though you don’t work on those days.If you travel to a destination within the United States for business purposes, and you spend the majority of your trip days on business, you deduct 100 percent of your direct route transportation expenses. You may deduct meals and lodging for business days as well.
- Foreign Travel Expenses
Use the seven-day tax deduction travel rule to create a business trip that is 87 percent personal vacation.If you travel outside of the United States for business purposes for fewer than seven days, you may deduct 100 percent of your transportation costs of getting to and from your foreign business destination – even if you work only one day. You may deduct meals and lodging for business days as well.
- Cell Phone Expenses
Deduct your smartphone and provide smartphones to your employees as tax-free fringe benefits.When a sole proprietor provides an employee with a smartphone or similar telecommunications equipment primarily for non-compensatory business reasons, it is considered a working condition fringe benefit that is excludable from income. The business can reimburse the employee for the full cost of the phone expenses (including the personal use) and deduct this amount on Schedule C. The reimbursement is tax-free income to the employee.
As a sole proprietor, you may deduct the business use percentage of your smartphone expenses and depreciate or expense the cost of the device itself.
Click here to view or download our 10 Tax Strategies for Schedule C Taxpayers: What How Where.
We at Morris + D’Angelo believe that Tax Optimization is one of the most empowering and responsible things you can do to protect your growing financial assets. Tax optimization looks at a multi-year approach to minimizing tax costs. Tax avoidance is integral to tax optimization.
In this article, I shared with you Ten (10) powerful Tax Strategies for Schedule C Taxpayers that you can easily understand and implement. If you need guidance regarding these tax-saving strategies, please contact us at Morris + D’Angelo. This is our Expertise!
Parts of this article are published with permission from Bradford Tax Institute, © 2021 Daniel Morris, Morris + D’Angelo
Daniel Morris
Daniel frequently provides Media Content via Workshops, Podcasts, and Printed Articles on topics like Bitcoin and Cryptocurrency, Wealth Preservation and Planning, Global Banking, and many other high-level financial topics that serve and demonstrate the Value of our Global Network that should be of interest to those who need Private High-Wealth Services.
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