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Old 12-23-2019, 06:37 AM
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When it comes down to it, your accountant should be advising you on how to spend your money in the upcoming year to reduce your taxes for that year.
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Old 12-23-2019, 06:49 AM
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thanks for the replies. I have been consulting with my accountant as well. One of the points of my original post, though I didn't say it. Is for nearly 10 years I ran a subsistence contracting business many times operating at a loss. I think it took a couple years to get out of the hole I was in once the economy started to improve. The last time I made any profit was 2007 and 2008. Those were my best years until now.

I had a retirement but it is all gone now. I have often wondered if at my age mid 50s if I should concentrate on debt reduction or retirement. I don't have a lot of debt though. I owe about 40 thousand on my home through a revolving line of credit. I had it paid off previously from a oil lease deal. I've been very fortunate in some things.
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Old 12-23-2019, 07:48 AM
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I have often wondered if at my age mid 50s if I should concentrate on debt reduction or retirement.
Both....

Sounds like Retirement is the priority.
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Old 12-23-2019, 08:26 AM
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I had a retirement but it is all gone now. I have often wondered if at my age mid 50s if I should concentrate on debt reduction or retirement. I don't have a lot of debt though. I owe about 40 thousand on my home through a revolving line of credit. I had it paid off previously from a oil lease deal. I've been very fortunate in some things.
The most affordable way to retire is without any debt. Your mortgage, car payments, and any other loans should be paid off.

I would look at retirement plans, but also plan to have your debts paid off when you reach retirement.

If you do it correctly and live in an area with a relatively low cost of living, you can do well on Social Security, but because of the uncertainty with the future of Social Security, it would be a good idea to have some type of supplemental income.

I know what you mean about he 2008 crash. I had a lucrative and fast-growing consulting business until the economy tanked in 2008, plus Google basically destroyed the business I was in. Over the years, I've watched Google destroy hundreds of thousands of small businesses.
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Old 12-23-2019, 11:32 AM
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I had a retirement but it is all gone now. I have often wondered if at my age mid 50s if I should concentrate on debt reduction or retirement. I don't have a lot of debt though. I owe about 40 thousand on my home through a revolving line of credit. I had it paid off previously from a oil lease deal. I've been very fortunate in some things.
I would pay off the debt on the house you live in. If things go bad again at least you will always have a place to live.

We own some rentals and a retail business and we agreed starting out that we would NEVER borrow against the house.

My wife's dad had a bad car accident that broke his neck that caused him to never work a real job again. The only reason they where not homeless was he paid cash for his house.
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Old 12-24-2019, 05:55 AM
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Wasn't sure to post this here or in the financial forum.

I need write offs and have a few ideas on some equipment and what not.

This is the first time since bush jr that my accountant called and told me to get some write offs before the end of the year.

The economy is flipping booming. It's awesome to have enough work again.
I've never understood accountants who say a person needs write-offs. The way they work is you spend say $1,000 in some expense that is used to reduce your income. If you are in the 32% tax bracket then you save $320 of that $1,000 you spent. In the end you will spend more on gaining the tax write off than you save. Even if you are at the bottom of the next higher tax bracket, you spend more than you save. About the best you will do is if you are showing so little income that the write-off makes you eligible for things like the EIC. Even tax credits are limited to 100% of the expense as long as you don't reduce your taxes to below 0.
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Old 12-24-2019, 06:13 AM
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Debt reduction is never a bad idea. Do that first and then maximize all you can into retirement. Death and taxes are always certain. My goal is to leave my family assets and no debt.
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Old 12-24-2019, 10:29 AM
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IRA and an HSA, if you qualify for those. Smaller deductions.

A vehicle deduction is attractive right now.
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Old 12-24-2019, 10:32 AM
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"I've never understood accountants who say a person needs write-offs."

It's not what you think. An accountant will look at your tax liability in percentage and may find you pay too much as a percentage and that you should have more tax deductions and credits. An old adage is that if you pay over 10% in federal taxes then fire your accountant. I don't what that percentage point is today, but I pay about 11-17% on any given year.
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Old 12-24-2019, 10:58 AM
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I would pay off the debt on the house you live in. If things go bad again at least you will always have a place to live.
I agree debt pay-off is good, but a mortgage, if reasonable and at a low interest rate, isn't one major debt to pay off. The only debt we have is the mortgage. We could pay it off, but invest that money which makes more interest than the mortgage interest is.

Find a rock-solid investment advisor and see which is the better bang for your buck. You may be surprised. I'm not referring to those people who bought more house than they needed at a high price that they pour money into, but people like myself and some others I know who bought a house for a reasonable price.

My house is valued at a mere 160k. We have less than a 90k mortgage on it. We have invested about 700k since we bought the place all of which pays more in dividends and interest than the mortgage interest. We are way ahead of the game. Use debt wisely and play with their money. Use it in a stupid way and pay for the problems. Some forms of debt can be bad; some can be good.
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Old 12-25-2019, 06:58 AM
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"I've never understood accountants who say a person needs write-offs."

It's not what you think. An accountant will look at your tax liability in percentage and may find you pay too much as a percentage and that you should have more tax deductions and credits. An old adage is that if you pay over 10% in federal taxes then fire your accountant. I don't what that percentage point is today, but I pay about 11-17% on any given year.
I get that part, but one way I pay less out of pocket, even if more is paid to the government, the other I pay more money out, but to private organizations. I look at the bottom line. One way I have more money in my pocket the other I have less. I fully support setting your lifestyle up to get as many deductions out of your normal everyday living as you can, but I think it is foolish to spend extra money you normally wouldn't, just so you can qualify for this deduction or that.

My wife would see it frequently where the uber wealthy would get mortgages so they could have tax writes offs, when they fully had the ability to pay off the loan out of cash on hand.
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Old 12-25-2019, 07:16 AM
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thanks for the replies. I don' think writeoffs/deductions should be reckless just for tax reasons, it needs to make sense. For example we could use a box and pan brake. I've gotten by without one. it would be handy but not necessary. It would help my shop process, not having one is a bit of a bottle neck at times.
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Old 12-27-2019, 11:29 PM
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I get that part, but one way I pay less out of pocket, even if more is paid to the government, the other I pay more money out, but to private organizations. I look at the bottom line. One way I have more money in my pocket the other I have less. I fully support setting your lifestyle up to get as many deductions out of your normal everyday living as you can, but I think it is foolish to spend extra money you normally wouldn't, just so you can qualify for this deduction or that.

My wife would see it frequently where the uber wealthy would get mortgages so they could have tax writes offs, when they fully had the ability to pay off the loan out of cash on hand.
Lots of writeoffs are things you would spend anyway, but next year. If you spend the money now you get the writeoff now.

For example property taxes for me are 25K. I can pay them before Jan 1, or wait until after Jan 1.

some things like a SEP IRA are unique for business owners. The OP can put away 57K or 25% of his income into a tax deferred account.

Mortgage interest is tax deductible so a 3% loan is really a 2% loan if you are in the highest bracket. You can keep the funds invested making on average 10% so why pay it off? There is some risk to doing this of course.

There are products that let you buy insurance with your profits this year and create an expense (no tax). Then pay out in future years when you have a loss. This just moves the tax liability around when it is most advantageous.

There are some products like bank on yourself that are fully invested, but let you borrow against it. You pay the interest to yourself. They arent deductions but are reasonably good ways to invest cash, but still have it available for use.


to the OP: if you were taking losses you should have plenty of carry forward losses to offset your profit this year.
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Old 12-28-2019, 09:35 AM
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Smart "write off's" should be an investment. Like you said the pan brake "while not needed" makes it easier / quicker for you to generate income, it can also expand your income. It's also an item that holds their value, especially if you buy used.
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Old 12-29-2019, 08:49 AM
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Lots of writeoffs are things you would spend anyway, but next year. If you spend the money now you get the writeoff now.

For example property taxes for me are 25K. I can pay them before Jan 1, or wait until after Jan 1.

some things like a SEP IRA are unique for business owners. The OP can put away 57K or 25% of his income into a tax deferred account.

Mortgage interest is tax deductible so a 3% loan is really a 2% loan if you are in the highest bracket. You can keep the funds invested making on average 10% so why pay it off? There is some risk to doing this of course.

There are products that let you buy insurance with your profits this year and create an expense (no tax). Then pay out in future years when you have a loss. This just moves the tax liability around when it is most advantageous.

There are some products like bank on yourself that are fully invested, but let you borrow against it. You pay the interest to yourself. They arent deductions but are reasonably good ways to invest cash, but still have it available for use.


to the OP: if you were taking losses you should have plenty of carry forward losses to offset your profit this year.
I get all of that and think I addressed it with my, "I fully support setting your lifestyle up to get as many deductions out of your normal everyday living as you can" comment. What I am talking about is something like I need to buy a widget just to get a write off, when I really don't need the widget, or I need to donate $5000 to charity to get a write off even though I wouldn't donate that money to any charity. Both are write offs that will you more money than the write off.

I do see the reasoning for getting a mortgage or not paying off a mortgage, if you are earning substantially more in interest/dividends, but many of my wife's clients claimed they were getting the mortgage for the tax write off. I do the same with all of my lines of credit. If I can make more in dividend/interest than I pay, then I don't pay off the loan. By substantially more the return you are making has to overcome the cost of the interest on the loan, the cost of taxes on the return, and inflation. If you are making 10%, but your mortgage is costing 3% (after being tax advantaged) that immediately drops your earned return down to 7%. Inflation runs at roughly 3% so that drops you return down to 4%. The risk is the risk and depends n your investment. So is the risk worth earning 4% on your money. One thing that needs to be remembered is that each household automatically gets $24,400 in personal exemption. Until you reach that level of deductions you are spending money that has no affect on your taxes and reciting of your expenses.
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Old 01-19-2020, 03:30 AM
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Start a new business, take all your hard assets from your plumbing business and shift them over to the new business. The new business hires your wife or son for a small consulting fee, the new business leases out the plumbing business all the tools etc for all of your profits.

Passive income.

You won’t be considered a “service business” and will get the 20% deduction off the total amount of gross income from the leasing of the tools.

Now, you can invest into real estate or numerous other business transactions and since it’s passive it is cumulative write offs rather than active income allowing you to build wealth.
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