Question : What is the best way to create a legal tax shelter?
First of all please understand that I have no problem paying taxes and yet like anyone I wish to keep as much of my hard earned money as possible. I started a small business earlier this year and recently incorporated it. It has done much better then expected and I want to protect the assets in the best way possible. Any help from knowledgeable professionals will be greatly appreciated!
- asked by montanamike
All Answers:
Answer #1
A tax shelter is a scheme or plan to generateartificial losses or deduction to improperly avoidor defer the payment of taxes. A very wise manonce said that if you pay your taxes you own yourmoney. Just ask Wesley Snipes who killed allthose vampires in Blade but got caught by the IRSfor investing in illegal tax shelters. You wantsome legal tax shelters, buy some depreciableequipment for your business before year end andclaim a section 179 deduction, open and fund aqualified retirement plan, prepay some expensesthat you will incur in the first months of 2007. Now that your business is thriving, it may be timeto upgrade to an accountant you can trust and notjust someone with a worse golf handicap.
- answered by mattapan26
Answer #2
In terms of legal tax shelter there are always twodebatable best ways that could be interchangeddepending on your needs. The number one taxshelter.The best tax shelter is still charity thisis true for all types of businesses anywhere inthe world. There are requirements on charity taxshelters like Receipt to be submitted to theGovernment and this Receipt is issued by thefoundation or charitable organization that you aregiving to.Donating can be also in kind: Buying anew laptop? Donate your - 3 year old Laptop to aFoundation. Giving a gift to yourself is notcharity but look at Legal tax shelter number 2 forthat.The number two legal tax shelter.AssetManagement: Buying future assets that reduce yourprofit margins for investment purposes. This canbe an investment to yourself or your company thatyou can use and also turn a profit when using it.Examples: Insurance for your company or yourself,Furniture, Computers and extreme cases: powersuits and paintings for the ultra rich. Key noteis to increase your operational expenses and makeyou money work for you.You will notice companieswill spend so much on the end of the year toincrease operational expenses.
- answered by makatimerchant
Answer #3
A tax shelter is something that you invest in thewill give you a tax savings today and hopefully aneconomic benefit in the future.I wold hope thatwhen you incorporated you also elected S-orpstatus. Otherwise you have complicated your lifeand if you don't plan properly will be subject todouble taxes. Once when the corporation hastaxable income and once when the corporationdistributes that income to you as adividend.Charity is not a tax shelter because yougive your money away in order to save taxes butthe is no anticipation of an economic benefit inthe future. Giving to charity is great but do itfor charitable purposes not tax savings. $1 tocharity will save up to .45 cents on each dollargiven and you are out of pocket the other .55cents.I think the best tax shelter is to maximizeyour retirement plan contributions. There are manyways of doing this that will allow you to providefor your future. You can do SIMPLE IRA's, SEPIRA's, profit sharing plans, pension plans,defined benefit plans or something as simple as aregular or Roth IRA.Each $1 put into a plan foryourself can save up to .45 cents in taxes and the.55 cents is in an investment account that willgrow tax deferred for many years.
- answered by waggy_33
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measure and fulfill your financial needs
