Using Tax Logic to Manage the Value of your Business

Using Tax Logic to Manage the Value of your Business

Using Tax Logic to Manage the Value of your Business

In the real world of business management ownership you can only create income in 2 basic ways. These two income methods are taxed differently by good ‘ol Uncle Sam.

The first method income is “earned” income. Let’s say I’m a graphic artist and you hire me to create a logo. I design the logo and you pay me $250. That is earned income to me (assuming it goes to me and not into a corporation). The $250 goes into my gross income and I pay tax on it as high as 35% federal and depending on what state you live in, it could be over 45%. So your $250 of earned income (assumes no state tax) is worth only $162.50 in your pocket.

The second method is capital gains income. Capital Gains can be generated in many ways. Let’s look at a simple example. You get on Ebay and find a great bike for $100, you buy it. Then a year later you’re riding around the block on your $100 bike and a guy stops you and offers you $350 on the spot. You take it and walk home! You made $250 (same as if you designed a logo above) but this is capital gains and your tax on that is only 15% of your gain ($350 rec’d  – $100 paid = $250 gain). Your tax for this is $37.50 and your net in pocket is $212.50.

You get to keep $50 more if you earned your money through capital gains income.  This is just another reason why accumulating capital is important to long term wealth…if you have capital you can manage your taxes a lot better than if you only have earned income.

When running your business think of all the ways to build value that is taxed at 15% instead of 35%…over time it could be a lot more money in your pocket. Talk to your CPA to see if you have opportunities to maximize the availability of the capital gains tax rates.

Good article on getting work done – 7 steps to Better Personal Productivity

Good article on getting work done – 7 steps to Better Personal Productivity

These ideas for getting more done make a lot of sense to me, I think I’ll keep them handy so I can stay on track for the big projects. I’ve done #3 successfully and I’ve victimized myself on #6.

Read the article here.

When I first got into the workforce I had a boss tell me, the distance between good and great is not as far as we like to use for an excuse. I’ve always tried to remember that.

Business Owners…Save Your Life…Now!

This post is a bit in left field for me but I ran across this study that is compelling and struck a nerve with me. Business owners often have way too much stress in their lives and the demands of the business can cause them to ignore their personal health while they slave away at keeping their business healthy.

Here’s an article on how meditation can dramatically improve heart health and even save your life…and I believe it! Think about it.. 50% reduction in heart attacks.

Read Article Here

20 minutes twice a day to save your life? That’s a great investment.

I am going to start this program and I’ll let you know my progress. I hope you decide to try it, please let me know how you do.