Every hard working American needs to have their own small business. You're about to discover 3 powerful reasons why this is true. And it doesn't even matter if the business makes any money or if you work hard at it or not at all! What you'll find is that the key is simply having one. While I would argue that real estate investing is the best small business in America, you're not even restricted by that, either. Here are the 3 reasons why you absolutely need to have a business:
Reason #1: Pre-Tax Power
When you are able to purchase items for your small business, they are paid before you pay income taxes, making it a "pre-tax" purchase. Think of your federal and state income tax rates as the amount of savings you get when you can buy something "pre-tax". Take full advantage of your business write-offs, whether that be a Netflix account for a vacation rental, a laptop that you use for work, or a vehicle you use to commute to work. By adopting this pre-tax mindset, you will be saving yourself so much money!
As YouTube subscriber, Bryce Matheson, commented in regards to this, "Biggest thing I own real estate are for all the business write-offs. Tools, miles, meals -- literally almost anything can be an expense."
I am not encouraging you to go against tax codes, but look at the purchases you make in your life that as a W-2 employee, you can apply to your business to save yourself money every year.
Reason #2: Deductions
The second reason you that you absolutely need a small business is the deductions that can come from it. From a home office deduction to the new 20% Qualified Business Income Deduction, there are several ways to reduce your taxable income because you are a small business owner.
Reason #3: Retirement Plans
Third, there are retirement plans exclusively available to small business owners! Here are some of the plans that you will have access to once you own a small business.
Solo 401Ks: The solo or individual 401K is the greatest retirement plan that currently exists and it is only available for small business owners. You can learn more about it in this detailed training on the subject Solo 401K Real Estate Investing. Just like everyone should have a business, everyone should have a solo 401K.
Defined Benefit Plans: Designed for high income earning small business owners to "catch up" on their retirement, a Defined Benefit Plan can be a great addition to your existing retirement plans, once you have maxed out your Solo 401K contributions. The best resource on this subject that we have found is Dedication Defined Benefit Services. There website can answer most of the questions you would have on this.
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