Slash Your Taxes: 7 Smart Strategies

As a business owner, navigating the sea of taxes can feel like steering through a storm. But fear not! With the right strategies, you can lower your tax bill and keep more money in your pocket. Here’s how:

  1. Max Out Retirement Contributions: Contribute as much as you can to retirement accounts. These contributions are often tax-deductible, lowering your taxable income. Think of it as killing two birds with one stone: saving for retirement and reducing taxes.
  2. Deduct Home Office Expenses: In this post COVID world, most knowledge workers continue to work in part or full time from home. If you’re working from the corner of your living room or a dedicated office space, you might be eligible for the home office deduction. This can include a portion of your rent, utilities, and internet costs. Make sure your space is exclusively used for business, though.
  3. Leverage Tax Credits: Dive into the treasure trove of tax credits available for small businesses. From energy efficiency improvements to hiring veterans, tax credits directly reduce your tax bill, dollar for dollar.
  4. Invest in Equipment: The Section 179 deduction allows you to write off the full purchase price of qualifying equipment or software in the year you buy it, rather than depreciating it over several years. It’s like an instant discount on new tech or machinery.
  5. Defer Income and Accelerate Expenses: If you expect to be in the same or a lower tax bracket next year, consider delaying invoices or accelerating expenses. Purchase needed supplies or pay bills early to reduce this year’s taxable income.
  6. Hire Family Members: Employing your children or spouse can shift income to a lower tax bracket and take advantage of their standard deduction. Just ensure the compensation is reasonable and for actual work done.
  7. Stay Organized and Track Everything: The key to maximizing deductions is diligent record-keeping. Use software or a good old-fashioned spreadsheet to track every expense and income source. When in doubt, ask a tax professional if it’s deductible.

Wrapping Up

Tackling taxes with these strategies can significantly lower your small business tax bill. Remember, though, tax laws are complex and ever-changing. It’s wise to consult with a tax professional to ensure you’re making the most of your tax-saving opportunities and staying compliant.

Happy savings!

Outliers: The Story of Success

Malcolm Gladwell’s Outliers shares multiple factors behind success, and that success isn’t just a combination of talent and hard work.  Here are the key takeaways:

  • The self-made man is a myth.  We have a bias to attribute success to ability and hard work.  Yet, other factors are at play.  Read on!
  • For most professions, there’s a base threshold for success.  Once you move beyond that threshold, having a better ability doesn’t increase success.  For example, if you’re a Mike Tyson, you reached 71 inches.  The average boxer has a reach of 76.” It’s related skills and abilities that matter.  For an attorney, those additional items could be the ability to connect with others.
  • While this point is debated, to be world-class in anything, you must spend about 10K hours developing your craft.
  • On this one, you don’t have much control.  The month you’re born impacts what you can achieve.  For example, my kiddos play hockey.  Teams are based on birth year.  So, someone born in January of a year could compete with someone of December of the same year… a year difference.  Please do it for those of you considering holding your kid back from school.  Research shows it gives them a head start in life.  Holding back would not be valid if all families practiced this approach.
  • Use practical intelligence.  Know who, when, and how to connect with people up and down the food chain.  The reality is kids of more affluent parents have entitlement, making them practice practical intelligence.  On the flip side, sadly, poorer parents are less likely to teach valuable intelligence.
  • Like the month you were born, when you are born matters.  Consider Bill Gates; he was born to be a young adult when the PC was almost of age and had enough technology to make it a reality.  For tech, it was best to be born around 1955.
  • Being born in different parts of the world matters.
  • Where you rank shouldn’t matter regarding important decisions or stating your objections.  Yet, this isn’t always so.  The book cites Korean Air, which had a crash rate 17X higher than the industry average.  Why?  Younger pilots did not express their concerns difference from older pilots.  Korean Air hired a firm to help correct this behavior.

As leaders or influencers, we should look for ways to level the playing field for all. 

Peak Mind

In Peak Mind by Amishi Jha, Dr. Jha shares three systems of attention for our brains:
Flashlight:  With the flashlight, we focus on the now.  If we are too focused, we can miss the bigger picture.

Floodlight:  With floodlight, our attention is on high alert.  What could be happening at the moment that may propose risk or, in some cases, opportunity? 

Juggler:  The juggler is the CEO of the mind.  Whatever the challenge, the juggler is on top of tackling everything.
Three things zap the ability to pay attention.  They are stress, threats, and mood.  When stressed, whether in business or home, it blocks our ability to focus.  When there are threats, we focus on personal safety instead of thoughts.  The final item that eliminates our ability to pay attention is mood.  From depression to the blues, it dramatically reduces our ability to focus.
When it comes to making memories, there are three steps:
1.      Rehearsal:  Rehearsal is repeating something over in mind.  It could be a PIN or a person’s name.
2.     Elaboration:  Elaboration is tying something new to an existing memory.
3.     Consolidation:  Consolidation creates new neural connections. 
The author shares that meditation helps with all three brain systems and creates memories.  She recommends 12 minutes a day for five days a week, and a technique is known as breath awareness.  In breath awareness, start with a quiet place.  Sit, close your eyes, and breathe.  Follow your breath and nothing else.  If your mind wanders, bring it back to your breath.  If you’re new to mediation and want guidance, try an app like Headspace. 

Top 2020 Posts and Executive Briefs

Here are the top posts and briefs from 2020. My thanks to all of you for your feedback and insights: