Did You Know You Can Write Off Your Profit To Prosperity Membership Expense??

Sep 24

So, this whole series, I’ve been reviewing my Profit to Prosperity Membership curriculum (I’m continuing to do so, by the way; this month we’re examining the ‘W’ portion of the POWER method--Weighing The Information.).

And, at this point, you may be thinking, “Gosh, the Profit to Prosperity Membership seems so great. As a member, I’d have access to all the benefits of having my own CFO, plus opportunities to collaborate with a supportive community of fellow female small business owners! But, I’m not sure I’m ready to pay for it.”

Well, first I’d argue that for a monthly valuation of $1,355, the actual $150 monthly investment and, therefore, $1,205 of monthly savings is pretty darn good. And then I’d argue that 95% of business owners with whom I’ve worked have seen a direct net profit increase within the first year of our partnership, so your membership will likely pay for itself.

And then, I’d totally checkmate by reminding you that you can write off your membership expense! There’s no reason left not to become a Profit to Prosperity member!

But if you were previously unaware of that last point, if you didn’t know that the Profit to Prosperity Membership fee could be classified as a business tax write-off, you may be thinking, “What do you mean, and what else could I be ‘writing off’?”

Let’s talk about that.

SO, WHAT IS A BUSINESS TAX WRITE-OFF?

Well, to fully understand what a business tax write-off is, you’ve got to have a basic grip on how taxes work in general. Stay with me; we’re not going to get too crazy.

HERE’S WHAT YOU NEED TO KNOW ABOUT TAXES:

As a citizen of the United States, you’re required to pay taxes of a couple different kinds.

THE FIRST KIND IS THE INCOME TAX.

This tax applies to everyone, but in a variety of ways. The percentage at which your gross income is taxed gets adjusted based on your tax filing status, which could be ‘single’, ‘married filing jointly’, ‘married filing separately’, etc. Then your income is taxed in tiers.

For example (completely fictional example y’all, because reality depends far too heavily on your individual situation), it’s not that the entire $100 you made this year will be subject to a 30% tax. That would mean you would owe $30 in income tax. It’s that the first $50 will be taxed at 5%, the additional $30 will be taxed at 10%, and the additional $20 will be taxed at 15%. So you’ll owe $8.50. Again, this is just an example and the percentages are ~*ficticious*~, but you get the idea.

So the combination of your tax filing status and your corresponding tax tiers (commonly called “brackets”) results in your income tax liability.

THE SECOND KIND IS THE FICA TAX.

This tax represents your Medicare and Social Security contribution and also applies to everyone, with a major distinction depending on whether you’re traditionally employed or self-employed.

If you’re traditionally employed, meaning you’re paid wages by a business in exchange for your work, you only pay half of the 15.3% FICA tax for which every citizen is liable, so roughly 7.65%. Your employer pays the other half.

However, if you’re self-employed, you yourself are both the employee and the employer. So you pay both halves; you’re liable for the entire 15.3% FICA tax. And that’s in addition to the income tax. It’s true; taxes are a lot.

SO NOW YOU SEE THE NECESSITY OF STRATEGIC TAX SAVINGS, RIGHT?

And, to be clear, I’m not talking about exploiting sketchy loopholes. I’m talking about understanding our nation’s system of taxation well enough that you can put to appropriate use the resources already freely available to you.

WHAT ARE THOSE TAX-SAVING RESOURCES, YOU ASK?

Well, one of them is business tax write-offs.

Because, as a business, you’re being taxed not on your gross profit, but on your net profit. Your net profit equals your total amount of money made, subtracted by your business expenses.

Which, by the way, ‘write-off’ equals ‘business expense’ equals ‘deduction’. They all mean the same thing. I don’t know why we accountants and tax professionals punish ourselves by using a million different words to mean the same things. I digress.

So, what counts as a business tax write-off serves to lower the taxable profit of your business.

The IRS defines what counts as a business tax write-off as “a business expense that is both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense doesn’t have to be indispensable to be considered necessary.”

So, admittedly, it’s hard to perfectly define.

Some of the most commonly recognized deductible expenses (Hear me throwing around confusing terms that are interchangeable with the term I previously used, just like your tax professional might? This is your opportunity to practice keeping your cool and remembering that just because they use language with which you may be unfamiliar, the reality is usually simpler than it sounds, and they’re not smarter than you.) are rent, labor, office supplies, advertising/promotion, insurance, and subscriptions. But there’s a lot more than just those.

Some of the most commonly forgotten business tax write-offs include:

The business portion of your cell phone bill
The business portion of your internet bill
The percentage of your home’s square footage used as an office
Mileage driven for business and other travel expenses
Meals purchased for business
Health insurance for you as the business owner, plus your spouse and children
The rental of your home to your business (limitations apply)
The depreciation of your office furniture and/or computer equipment
Bank interest and bank fees
Continuing education for the benefit of your business (Hello, Profit to Prosperity Membership, is that you?)
Payments to your dependent for their help with your business (if you keep this amount at $12,500 or less, then your dependent won’t be not taxed on their income)
Makeup, hair styling, and clothes for brand photoshoots

That’s a pretty comprehensive list, huh?

Yep, and that comprehensive list represents thousands in tax savings. And there’s more goodness where that came from.

(To be clear: I never recommend spending money just to get the write-off. That doesn’t make sense. But what I do recommend is investing in yourself and your business and KNOWING that doing so will decrease your taxable income.)