It’s a fairly common practice for businesses to spend extra money in order to save tax. However, what if instead of spending extra money all you had to do was spend the same amount of money differently?
A New Perspective
We recently were working with one of our professional services clients analyzing the impact of the new tax law, and the new 199A Qualified Business Income deduction in particular. This client’s income was about $100,000 dollars too high for her to qualify for the 199A deduction. The 199A deduction would have allowed her a deduction of 20% of qualified business income.
After meeting with our client and asking some targeted questions, we identified certain expenses that she would definitely incur in the next three months that could be accelerated into 2018.
We advised her to pay for the expenses this year rather than waiting until next year. By doing so, she would increase her expenses and decrease her income. By decreasing her income, we were able to qualify her for the new Section 199A deduction, which resulted in an extra $60,000 dollar deduction. Our client was able to save $20,000 dollars in tax.
Make Your Money Work For You
This effective strategy allowed our client to spend money that she would have to spend in the next three months anyway and now she was able to receive a huge tax deduction. This is a great example of how Tembo uses the tax law to our client’s advantage.
Stay tuned for part two coming soon!