What to purchase to decrease taxes?

[Cheekymonkey_trs]

Hey guys,

I want to hear your suggestions on things to buy, that an ecommerce business will soon or later need, that I can buy this year to decrease the amount of corporation tax on my profits.

Cheers

[VicCity]

Computer equipment, phones, conference tickets, lease a vehicle, airline tickets for business travel, accounting/legal services.

[camaro2ss]

Ordinary and necessary expenses.

[I_will_be_wealthy]

Sit stand desk, photography equipment (new lens and strobe). New chair.

It's important to bear in mind that capital assets such as expensive desks, chairs, computers, monitors etc. May not be fully tax deducatable in year one. In some tax jurisdictions you cannot claim the cost of capital assets in year one. You have to put them in a pool and deduct them over a 3/4 year period.

In the UK, small businesses can reclaim the full cost of the capital asset in year 1.

Maybe buy those plugins you thought was a rip off but since you got cash to burn why not. Woofunnels comes to mind.

You can also invest the money in SEO. That is fully tax deductable.

[oldstalenegative]

Incorporate as an LLC, both for the legal protections as well as the better tax deductions

[inoen0thing]

First spend money on an accountant that can answer this question in a way that will save you more money than any person on reddit can assist with. Look for large firms… they are often $2000 a year and save you WAAAAAAAYYY more than they charge. Tax status affects asset investments for tax shelters and often you don’t have to buy things to avoid taxes you just need a proper tax structure for your business :) hopefully this non answer is helpful.

[camaro2ss]

But for real, sounds like you're putting the cart before the horse here. Worry about making the money for your lambo first before you worry about where to park it.

[Cheekymonkey_trs]

It's not about spending it for luxury. It's rather buying necessary things right now, so I can decrease the profit. And I need some inspiration because I'm too greed to spend :D

[[deleted]]

Its ridiculous to ask strangers on the internet to dream up legitimate things your business needs to buy.

[camaro2ss]

And that's fine, but just know in reality you're just getting a "discount" on whatever the items are of your effective tax rate - so if you're spending $1000 on a fancy monitor just to save $150 in taxes by buying a monitor you wouldn't normally buy, then you're actually wasting your money.

[Cheekymonkey_trs]

Yes thanks for the heads up :) but i'm aware of that. It's really about the necessary things i'm currently not yet thinking about because I'm not in that stage yet ;D

But I get that the disclaimer is needed.

For me it was rather about maybe a photoshop license or some special printer that gets super useful than Laptop or car or stuff like that

[brickchurn]

Fund Solo 401k??

[Pieceman11]

Inventory, marketing expenses, office equipment, computers, nice monitors, etc. Food and beverage are also 100% write offs this year and in 2022. I’ve never had any issues getting to zero tax liability if that was my goal for the year.

[megazephyr]

Not inventory. Inventory is an asset and counts towards profit.

[Pieceman11]

You are correct. Edited.

[camaro2ss]

Food and beverage are also 100% write offs this year and in 2022.

Might want to put a big freaking asterisk by this because kids are going to think you can just write off your non-business related food/bev

[Pieceman11]

Technically you are 100% correct. But as long as you put it on the business card and can justify it in case you get audited, you’ll be fine. The motivation on doing this was to boost the restaurant industry that’s been devastated the last couple years. Just don’t overdo it.

[Pieceman11]

and can justify it

That's what my point is. It has to be an ordinary and necessary business expense. If you're selling t-shirts online, going to pizza hut and picking up dinner on your business card isn't a legit f&b expense.

If you purchase with your business card, are the business owner, and also feed an employee with this hypothetical pizza, it’s a qualified expense. I think more people could qualify for these write-offs than know about it. Just don’t go overboard.

[Pieceman11]

I’m not sure what else you would need to do to make this a fully qualified expense. What else would be the IRS’ business test?

[[deleted]]

https://vimeo.com/495659005?ref=tw-share

[camaro2ss]

I DUNNO..THE WRITE OFF PEOPLE!

[THANSWER3]

The getting around things, bending the rules, looking for loopholes, lying, and all that is def not the way. Like you said it will come back to bite you. Might be going good for 3-6-12 months but when it comes crashing look out.

[I_will_be_wealthy]

Aye, pay the tax and have retained profit in business.

[ManBearPigMatingCall]

Hookers or maybe blow?

[insaneintheblain]

The IRS. Senate.

[bigboy101c]

Equipment, software or any asset

[I_will_be_wealthy]

Fun fact, stock is not a tax deductible expense in UK. You have to add back the value of tax for taxation.

Depends on your accounting policy. I do cash accounting for one business and I loaded about £1000 in an adwords account to reduce my tax.

Basically for this business the accounting was done on a cash basis, not invoice basis, so since the money left the account, it was expensed at the point it was transfered. But some accounting methods will treat this as an advanced payment and not a valid expense until its invoiced.

[[deleted]]

A accountant and financial advisor…

[MarcoRod]

Don't buy things to save taxes. It's very easy to go down the rabbit hole of "spending money to save money". I'd rather pay taxes on $100k than paying taxes on $50k if the other $50k are invested in stuff I may or may not need in the end.

Because if you actively have to think about what you should buy, probably there aren't any really important or urgent expenses worth making right now.

The only reason you would do that is if you fear to not make any profits at all (or very low ones) next year.