Demystified Blog Archive #49 – Create Permanent Tax Savings #2

The global economy is certainly growing.

US GDP has increased from $14.8 trillion just prior to Lehman’s collapse ten years ago, to $20.4 trillion today, an increase of 38%.

These are all good signs. And if that’s all you look at, it certainly seems like everything’s all good.

But remember that great F. Scott Fitzgerald quote: “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function.”

So let’s look at the other side of things.

Financial markets have increased, wages have increased (barely), economic output has increased.

But what has really increased?

DEBT.

As I mentioned, US GDP is up 38% over the past decade.

Awesome!

But, over the same period, the US national debt has increased 122%!

In other words, over the last ten years, the US national debt increased by more than $3 for every $1 increase in GDP.
It’s brilliant!

And it’s not just Uncle Sam. Overall government debt across the world has tripled to $63 trillion.

Keep in mind this number does not include unfunded liabilities like pension obligations, or the $40+ trillion that the US government owes its taxpayers for future Social Security benefits.

Now, if you know me, you know that I’m not a doom and gloom type of guy. But, there is no fucking way the economy can sustain this path for the long term.

It’s just simple math.

This is why it is important to create permanent tax savings.
Remember, every tax dollar saved is cash directly back into our pocket, bank account, etc. that can be re-directed, re-invested, etc.

Another one of the most common tax deductions that is overlooked is the business use of electronics such macs, ipads, software, hdtv’s, Lenovo, androids, iphones, etc.
In this day and age of the mobile office, technology allows us do just about anything, anywhere, anytime. That means that any type of electronic device can be regarded as a legitimate business expenses that is ordinary and necessary.

These ordinary and necessary business expenses are tax deductible.

Normally, we will capitalize these types of business purchases and then amortize or depreciate them over the life of the asset class. Recently, the IRS (Trump Tax Cuts and Jobs Act) has given us additional favorable tax treatment revolving around special bonus depreciation and Section 121, which allow us to deduct 100% of the asset purchase in the first year.

With that said, it might make sense to deduct 100% in the first year. On the flip side, if the deduction does not provide any additional tax benefit in the first year, we can elect to depreciate the deduction over the life of the asset and push the tax benefit into future years.

I would suggest speaking with your tax preparer before making a decision.

In addition, the new laws widened the scope as far qualifying asset purchases of real estate investing businesses by allowing this treatment for certain acquisitions and additions to real property.

The possibilities are limitless.

Of course, there is always additional information you should consider when setting up any type of business, finance, or taxation strategy plan. And, you should always be working with a team of professionals to help mitigate the risk of any investment.

To your investment freedom