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The evil 5 letter word "TAXES"

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  • #16
    Around this time I have a general idea of what Ill pay in taxes. So what I do is buy all my tune up parts for equipment and trucks (belts, blades, plugs, filters, brakes, fluids, tools, tires, chains, trimmer line, bearings). I rather buy it now and get the deduction in a few months then buy it in spring and wait a year to get it back. This is all stuff your going to use either way. It will never hurt to have a extra set of blades a spindle or so on. There small expenses too but they add it.

    Sometimes ill purchase equipment that ill need next year. My local mulch yard buys a new truck or loader at this time every year. That can be a gamble though if business becomes slow. Thats why I say get everything to maintain your current equipment now. Then when spring rolls around youll have everything tuned and ready to go.

    That would be my advice. Spend what you can, dont spend it all so you make no profit. In a way taxes penalize you for saving and forces you to reinvest earnings.

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    • #17
      For those that don't understand this too well, what do you feel are the benefits to purchasing parts or equipment now? How much are they really saving? What is the difference if they buy it now or next year?
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      • #18
        For those that don't understand this too well, what do you feel are the benefits to purchasing parts or equipment now? How much are they really saving? What is the difference if they buy it now or next year?
        The main difference is if you buy the parts in march or when something breaks in the summer. Youll be waiting a long time to claim it on your taxes. So its coming out your pocket for a while.

        The other factor is for every dollar you didnt spend on parts, youll now pay in taxes. I rather have a extra set of everything then a extra $500 tax payment. So either way the money is gone.

        If you buy now. Youll be using end of the year surplus money and getting the money back in the form of a deduction in april.

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        • #19
          The other factor is for every dollar you didnt spend on parts, youll now pay in taxes. I rather have a extra set of everything then a extra $500 tax payment. So either way the money is gone.
          No matter when you buy it, such expenses are still tax deductible right?

          The thing I get concerned with is newer business owners tend to take this and run with it and at the end of the year spend everything on stuff they may or may not need.

          Ultimately buying parts and writing that expense off as a tax deductible expense really means you are still taking money out of your pocket to purchase the things.

          Where something that you can write off as tax deductible is still costing you 70 cents on the dollar isn't it? Depending what your tax bracket is?

          It's not like it is free right? If you didn't buy that say $100 part, you would still retain $70 or so after you paid taxes on that $100. So doesn't the question of whether you should buy something like that or not come down to, would you rather have that $70 per $100 in your pocket or would you rather spend it on a part and have a 30% or so discount because you are buying it with non-taxed money?
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          • #20
            No matter when you buy it, such expenses are still tax deductible right?

            The thing I get concerned with is newer business owners tend to take this and run with it and at the end of the year spend everything on stuff they may or may not need.

            Ultimately buying parts and writing that expense off as a tax deductible expense really means you are still taking money out of your pocket to purchase the things.

            Where something that you can write off as tax deductible is still costing you 70 cents on the dollar isn't it? Depending what your tax bracket is?

            It's not like it is free right? If you didn't buy that say $100 part, you would still retain $70 or so after you paid taxes on that $100. So doesn't the question of whether you should buy something like that or not come down to, would you rather have that $70 per $100 in your pocket or would you rather spend it on a part and have a 30% or so discount because you are buying it with non-taxed money?
            This is why I said spend what you can. If you were thinking of adding a new push mower go for it. I wouldnt go get a ztr so I didnt have to pay taxes. It would be very unwise to just blow money not to pay the tax man.

            Yeah you could deduct it the following year. Thats why its a preference. Spend now when you have a surplus of cash or spend in the spring before money is coming in. The only problem with spending in the spring is your waiting a year to get the tax deduction vs a few months.

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            • #21
              now what if you invested this into a CD or a bond? would you still have to pay income taxes on it?

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              • #22
                now what if you invested this into a CD or a bond? would you still have to pay income taxes on it?
                From what I know, if you buy a cd or a bond, you buy it with post taxed money. Meaning this is money you have already paid tax on.

                I do believe there are some bonds that you don't have to pay an income tax on the interest but I don't know much about them.

                On the other hand, with an 401k there is a type you can put money in that is pre-taxed. Then you pay tax on it after you pull it out when you are retired. With the goal being, you will be in a lower tax bracket at that point in life.

                Ultimately, it is very important to not spend money on things you don't need. Running a streamlined operation and banking as much money as possible is your best bet for business longevity.
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