Quote:
|
Originally Posted by Sultana
The main reason to start a business is to make money, part of that is to reduce (legally, of *course*) the amount of taxes one pays.
|
I talked to my Dad this morning to help me clarify tax deductible and he said that "tax deductible" is really a misnomer, that those expenses are not deductible from your taxes. What those expenses really do is reduce your taxable income. So, it amounts to something like a giant Flex-Plan, you get to pay those legitimate expenses with pre-tax dollars, so you pay taxes on a smaller amount. So, if you are at a 30% tax rate, it is like getting a 30% discount on all your business expenses. This is especially useful for things that could be business related expenses, but that you would do anyway--like a trip to Egypt, perhaps.
He suggests that you "shadow" it for several months. Keep track of your studio expenses and income so that you really know where you stand, and then decide whether to go legit--or keep this income as part of the "underground economy." Hope this helps.
Lindy