I was going through a Profit & Loss Statement with one of my clients.
[The image is a photo from the actual coaching call with Rick & Patty! Wanted this post to be as authentic as possible…]
Me: “Rick, you guys have been doing a lot of team meetings where you bring breakfast in and do training this year, right?”
Rick: “Yup! Just like you’ve been telling us to, coach!” [I added that last part – he really just said, ‘Yup!’]
Me: “Why am I not seeing hardly any expenses under this ‘Training/Employee Meetings’ line?”
Rick: “Oh, we’ve been putting all the food/drinks from those meetings under ‘Meals & Entertainment’”
We went on to discuss this:
Let’s say you spent $2000 on the food/drinks/etc. for those meetings.
Under ‘Meals & Entertainment’ – that $2000 is cut 50% – so now you have $1000 expense to deduct from your total revenue.
If it’s under ’Training/Employee Meetings’ you can deduct the full $2000 expense from your total revenue.
At a 25% tax rate – that’s an additional $250 of tax savings simply by correctly categorizing!
Note: There are some rules related to this – you need to invite all of your employees to the meeting, etc. (check with your CPA!) – BUT it’s a common little tax savings that I often see remodelers missing.
QUESTION: What are other (legitimate) little tax savings that your fellow remodelers should keep an eye out for?