At least once a day, I have clients ask the most basic accounting question – “How can I lower my tax liability?”
That answer is always a hard one, as there are so many variables involved – marital status, income, deductions, credits, equity, home ownership, business ownership, children, etc.
One nearly universal strategy I recommend for people who own homes that are at least 8 years old, though is simple – fix everything that you can in it!
What does that mean? Simple: A home that is nearing ten years of age or older has multiple systems in it that are not as energy efficient as those same systems today. Most people look at insulation when it comes to energy-efficiency, but the HVAC system, water heater, and electrical system is a more telling example.
We’ll get into more detail about that A/C system in a few minutes, but let’s start with the basics:
There are a lot of potential tax credits in repairing your home, and tax credits are superior to deductions. Why? That credit is a dollar-for-dollar reduction in what you owe, not a deduction on your overall income. Now, what we’re talking about in these examples falls into what is called the Residential Energy Efficient Property Credit and can qualify you for up to a 30% tax break on items like geothermal water heating, solar panels installation, and other upgrades to existing systems in your home. The benefit, of course, goes far beyond the tax breaks, though, because each of these upgrades serves to lower the monthly “nut” that you have to cover to pay for the home and the associated expenses of owning it.
At the same time, more mundane upgrades like doors, windows, that insulation we mentioned earlier, and even types of roofing materials help to give you a break in what the IRS terms “qualified energy efficiency improvements” and there is even another category, “residential energy property costs” which allow you, as the homeowner, to claim credits with HVAC systems, heat pumps, natural gas upgrades, and furnaces.
Why are these important? Well, let’s go back and talk about that air conditioner that you don’t want to replace. What most of us don’t know is that the traditional refrigerant used in home and business HVAC systems is being phased out of use and for systems that are 8 or 10 years old, the cost of fixing them versus upgrading them is going to be excessive. Even refilling one leaky system after fixing it can approach $1,000 (plus the actual repair costs!) so the idea of using those monies to upgrade to a newer system in lieu of “fixing” it again may lower your overall operational expenses in the long run.
Let’s face it, most of us cannot fathom not having AC in the summer, so understanding how repairing compares with upgrading can be an important part of your tax strategy as older systems begin to have problems and the cost of replacement versus refurbishment can be offset by knowing there are tax breaks that can help.
Would you rather hear that from the repairman or from a tax specialist? If you have had to replace or are thinking of replacing any of the large systems in your home – or of a total renovation – then I invite you to come in a talk to me and the team about your plan. It may be that there are some hidden tax breaks in your plan that can allow you to recoup those expenses far faster than you initially thought.
Managing Your Time Management Time
Many people in business – both owners and employees – simply are not as efficient as they could be. Five, ten, and fifteen minutes lost here and there add up over days and weeks to effectively lose months of productivity annually.
…And those months are really lost income.
I would encourage you to log those lost hours for at least one week by keeping a regular time log.
So let’s talk about those lost hours and the causes for those losses. Some of them may not go away immediately – a single parent who has to pick up a child from practice may not be able to instantly change that, but you need to think analytically (not reactively) to arrive at a solution to how best to manage that impact on your time. Can you go to work earlier? Have someone else pick up the kids and bring them to the office while you finish up (they could do homework while you close out your day)? Creativity is key here, because you are never going to not be a parent, so well-planned solution will be more profitable than a slipshod one.
On the other hand, if you simply got lost in social media or email each day, then you have to be smarter. Have the discipline to set standards for when you’ll be attending to emails and when you’ll check your social media pages.
No matter what, you have to make a decision – do you want to make more money in your business? If the answer is “no” then close out this article, because the rest of the page is not going to help you.
If the answer is “yes”? Read on!
Now, you need to do some planning. If you discovered that you “created” eight extra hours each week, that’s great. Should those hours be spent “upselling” current clients or finding new ones? The answer, of course, is that it depends. In a retail environment, especially a brick and mortar one, the best advice is probably to look harder at advertising with that extra time. What type and how much is going to be up to you, but eight hours is a full day of extra time in the office, so why not use it – buy a CRM and learn to use it to drive new or return business in the door.
On the other hand, if you work virtually or the majority of your clients are connected to you only through technology, then spend this “new” time learning how and why those clients inevitably come to you to seek your services. Once you understand that, refine that client acquisition system to drive more new clients to you. In doing that, of course, you’ll end up with more business and those “extra” eight hours need to shift their focus to refining the systems you have in place to better serve them – faster and more efficiently.
The end result of spending time working on your business instead of frittering away unproductive time elsewhere is a more efficient company and a true reduction, over time, of the hours it takes to successfully execute any (and every) task in your business. Don’t waste time, make it!