It wasn’t nearly as scary as I was anticipating
If you’ve been in business for 10 years, or 10 minutes, you owe it to yourself to find a good CPA.
Here are the cliff notes from yesterday, in no particular order:
- For our situation, he highly recommended restructuring to an S-Corp. The threshold where this makes sense from a financial perspective is much lower than I was thinking. Between filing requirements and additional paperwork, it may cost us an extra $800-$1200/yr. But, we could save $5k+ on next year’s taxes. Basically, you can take half your income as salary, and the other half as dividends. You only pay self employment tax on the salary portion. So you save 15.3% off of whatever you take as dividends. For us, that means taking $35k salary, and $35k in distributions.
$35,000 x .153 = $5,355
$5,355 - $1,200 = $4,155 net savings
- If you buy a vehicle that you are heavily modifying to use as a strictly work vehicle, you can enter it as a piece of equipment instead of a vehicle, and expense it 100% the first year with Section 179. For us, this means getting that Tacoma we want with the sub 6k GVWR, taking out the back seats and installing shelving, putting on a flatbed with our equipment mounted, and some signage, and we can write off the $30k+ for 2018 taxes. This should reduce our liability by around $10k.
There are some caveats to this, of course, which you can go over with your CPA. For one, once you’ve expensed something 100%, if you resell it, 100% of the sale price is treated as capital gains and taxed as such. You can never go back to mileage deduction. And a couple other things I forget, that really didn’t apply to us, anyway.
We’re doing pretty darn good for a seasonal 2 person service business in VT. That was nice to hear
Gotta get a lawyer
Everyone pays taxes at some point. Just comes down to when and how much you want to pay. There’s a lot you can do to avoid paying more than you should. But there’s no free rides.