When individual clients ask, “What is a good tax planning strategy?” One of the things I tell them to consider is to start out with a part-time business. The biggest difference, when you own a business, is you spend money and then pay taxes on the net income after expenses.
I have been keeping a watchful eye on a part-time business that is growing fast in Nebraska. This business has good potential and flexibility for your schedule. Consider signing up as a driver for Uber or Lyft. I, personally, have used Uber when traveling and it has been a very good experience. What I find interesting is the fact that all drivers are all self-employed, independent contractors that set their own schedule when they are available to give rides. This all translates into a part-time business that has great tax benefits with minimal startup costs and overhead.
When you have a part-time business, the IRS allows you to deduct expenses against your gross sales to determine if the business shows a profit or not. In most cases, a loss from your business can be used to reduce income from your job. In the event you show a profit, you do not pay taxes on the whole gross income, just the amount of the net profit. For example, if a business grossed $7,000 and had expenses of $5,000 you would only pay taxes on the $2,000 net income.
There are many different business expenses that can be deducted. If you’re interested in learning about additional expenses that can be deducted, please review my booklet, “How To Cut Your Taxes by 62%.” You can also check this article out for more information: 16 Uber and Lyft Tax Deductions Drivers Can Use in 2017.
If you are interested in talking with one of our tax professionals to determine the best strategy for your business situation, please contact us. Call now, we’ll be happy to hear from you!
NOTE: This information should not be considered as tax/legal advice. You should consult your tax/legal advisor regarding your own tax/legal situation.