Alright, we continue the tax strategy framework,
the eight-step process that I'm going through,
and that I do go through with clients when I'm meeting with them one-on-one,
and that we implement at Beamington Company as we're strategizing with clients.
So this second one, this is two of eight,
is deferring income and accelerating
expenses. It sounds so basic,
and you're, like, it doesn't even seem like it.
It should be a strategy at first, but I'm going to explain,
I'm going to walk you through an example of how powerful of a strategy
it can be. So just from, like,
a simplistic approach, it really is as simple as it sounds.
So deferring your income.
And accelerating your expenses. If you are,
let's see, maybe talk about who this could apply to.
If you are an employee, you get a regular paycheck,
and there's no flexibility of when or how you get paid.
This might not be a strategy at all for you on the income side,
but the expense side, there actually,
there are, there is some, some planning that you can do.
There are some strategies that you can do, even if you're on employees.
So don't, you don't want to phase out here or quit listening here if
you're an employee. So this is for employees or business owners.
There's, there's examples that I'll go through for both. So let's talk about the
income side first. So deferring income.
So in what, when you think of the tax law, when you think of
tax filings, think of it like a year-to-year basis.
It's calendar year, opens January 1st,
closes December 31st.
And things like that fall into that bucket are subject to the tax of
that tax year. And so that's what we're talking about is deferring income out
of the current bucket, pushing it to a future bucket.
And then on the accelerating expense side, we're grabbing things from a future expense
bucket and pulling them on into the current year.
So it all comes down to a calculation. We're calculating net taxable income.
And of course, the more income you have this year,
the higher your taxable income will be this year, the higher your tax will
be. The more expenses you have, the lower your taxable income will be,
and the lower your tax will be. So it's just,
it's just a calculation. But here's,
so where the strategy comes in, a lot of it does have to apply,
well, I'll say the simple strategy,
the simplest part of it is just, oh, cool,
lower tax this year, if you're going to pay something next year,
next year anyways, or you're going to report that income anyways,
over the long term, say the one,
two, or three years that you would have been paying or receiving all this
stuff anyways, it could end up being the same,
but you're going to benefit in a costly couple ways. the first way is
the time value of money. So if you have to pay,
say you've got a $10,000 tax bill and there's a way you can push
that tax bill to next year,
instead of like. You giving that $10,000 to the IRS or the state now,
you can hang on to that $10,000.
You can maybe pay down alone for a year and save on the interest
expense or put it into a savings account and earn four or five or
six percent. On that money for a year.
So, you being in control,
like, I love being in control of my own finances and destiny and when
I'm paying things. and, yeah, you, you, not having to pay that tax now,
it keeps you in control of that money. so if it's paid in a
future year and it's exact same dollar amount at a minimum,
you get the time value of money. for the first time. Remember to take
advantage of the time value of money and either pay down loan or put
it somewhere where it's earning interest for you.
So that's like the simple tax savings.
That's kind of like a nice to have thing that it's,
it's not, it's sometimes. It's not,
might not be worth it to people to jump through a ton of hoops
to get to that point. So the other benefit,
this is the bigger benefit that I really want you to think about,
is if there's a year, so year to year,
If you're fluctuating into different tax brackets.
So say this, you, you have a really high,
you have a really high income year. And next year,
your income's gonna drop really low. Say you sold a business this year,
you got a big bonus this year in your name. Really high income tax
bracket. Some, like accelerating and expense this year.
Let's say you, let's say you're in a 32% tax bracket this year.
But next year, you're like, well, yeah, sold my business right at this or
that. I'm gonna be in a tw- 12% bracket next year.
If you got a $10,000 deduction this year and it reduced your taxable
income by $10,000.
If you're in that high bracket this year, you could save $3,200 this year
in tax comp- Thank for your compared to paying that expense next year when
you're in the low bracket, you'd only save $1,200 attacks.
So the timing does matter of when you're paying the expense.
If it fits into this calendar here bucket,
remember like. Calculations are done on this calendar year and it depends like
your, your tax bracket is calculated each year and it could be different,
could be wildly different from year to year. So that's one of the big
things, just the timing of it impacts your tax bracket.
And if you're influxuating tax brackets, there's some fun planning techniques you can do.
So if you are doing, it's like the income tax projection tool.
We have. Having the Wealth Game Basics course or Wealth Game Alliance,
which we bring up a lot and go over questions. Doing the multi-year strategy
or multi-year projections of just company.
It is great to come up with the current year estimated.
But I would throw, throw some of your estimates out in the future years
and kind of track that as well because there could be some additional planning
opportunities with all that.
So in related to deferring income.
we're still, still related to that. some ways to do this.
So I've talked about like why we would want to do it.
But I, I want you to know like exactly,
like what are the very specific things you could do?
Like wha- What you could pre pay? Like what,
what, what income could you defer delay?
What, what expenses could you play around with?
So related to income as cash basis,
tax payers. And so first I'll talk about like an upl- We'll one.
We'll in the one. We, if you're like, hey,
employer, could I get my bonus January 1st next year?
Instead of December 15th, say it's a Christmas bonus.
I, I couldn't think of a lot of employers that would say,
nope, you have to get it now. Maybe, maybe they're doing their own tax
planning and they have to get it out to you this year, but that's
an opportunity for employees to defer.
That would be deferring income if you're going to be in a lower tax
bracket next year. Or if you just don't want to pay the tax on
it this year and you don't need. The funds right away deferring it a
couple weeks. Like, you can defer the actual cash receipt two
weeks, but you don't have to pay the tax. It doesn't hit the tax
year. Until your file and your tax return the next April after this upcoming
April. So that's definitely a possibility for your W2 employee for business
owners. One of the tactics is,
well, I'll tell you what, one of the tax tactics is not.
It's not hanging on to your,
cheques. Like, if someone sends you a cheque,
it's considered received, even if your cash base is tax payer,
if you're, if you're in ownership of the cheque,
you need to be reporting it on income. So I would just depo- If
you get cheques, just deposit them. But if you're invoicing system,
I know Christmas gets busy and holiday season gets busy.
If you don't even send the invoice, until after the holiday season,
say until January 1st next year. And you don't actually receive the cash until
the next year, you're not. You don't have to report that income till next
year as a cash basis tax payer. so that's another opportunity there for you.
and then if you've got, So now let's talk about expenses.
if you've got equipment, or say you're a real estate investor,
there are just assets and general fixed assets,
buildings, there's a lot of flexi- ability and how depreciation is recorded.
There's cost aggregations, which we can accelerate depreciation.
You can opt out of bonus depreciation so you can be holding back some
depreciation if you don't need it. And if you're like,
Hey, I w- I want to retain that depreciation and those expenses for future
years. So there's some, some playing around with the numbers,
especially with depreciation. But it's not just playing around,
like it's legitimate tax planning that is legal and allowed and in the.
Tax code that you can do. and then the other one is paying like
accelerating expenses. for small,
for small. All. Taxpayers and small,
meaning like less than $25 million a revenue.
there's certain things you can do, like with inventory.
Like, if you don't have to keep track of your inventory,
you can write it off potentially supplies.
if you've got repairs, repairs that need to be done,
or improvements, a tenant build-outs,
like, just things that you're gonna be paying anyways,
buying, like, prepaying, or buying supplies that you're gonna need or f the next
few months, some- those are some examples of things that you could prepay,
buy now, pull into the current tax year to get the deduction now.
And then, of course, next year, you're not gonna have those deductions,
so we got a plan for that in the future year,
but- just- there's- there's a few things to consider there.
So, remember, I told you, it's not as simple as just deferring income and
accelerating expenses. There's some strategy to it.
You wanna watch the tax brackets, which means you need to know what your
tax brackets are. You need to get a good estimate.
You need to have your bookkeeping done, your accounting done,
at a minimum, a tax projection for the year.
You've gotta be on top of that to be able to- really,
that's kind of the first step as we're doing these strategies.
We need to know where your- at so we can start to see what
makes sense and what's worth- yeah, worth it to do or not.
Okay, so that is number two of eight for the tax strategy framework.
We will see you on the next episodes. See you.
