Write-off Startup Costs for Business (Deducting Education Expenses)☕Coffee With Carl Ep. 41

Write-off Startup Costs for Business (Deducting Education Expenses)☕Coffee With Carl Ep. 41


(energetic music) – Hello everyone and welcome
to another Coffee with Carl. My name is Carl Zoellner. I’m one of the attorneys with
Anderson Business Advisors, and today we want to
talk a little bit about expensing education cost! Now, expensing education cost
can be incredibly valuable, but one thing I want
to chat about first is it’s sort of a misnomer
in what we’re expensing or how we would do it. So, depending on what you’re doing for your type of investing, whether stock trading, real estate, almost any line of business
you’re entering into, one of the biggest hurdles is being able to expense
the cost of that education. So, say I enter into a real
estate training course, spend $50,000, I wasn’t
already in the previously in that line of business, it’s gonna be very difficult for me to expense those costs. Some of the CPAs out
there will tell you to just take that expense on your schedule C. That is, to me, very risky, as well as creates an audit risk. In my opinion, and in our opinion, the best way to go about this is to actually setup a corporation, a C-corporation specifically, if you’re not already in
that line of business, and then include that education cost as a startup expense to the business. Now, we call it education cost because that’s the easiest way
that people understand it because they paid for education to learn how to do these
certain types of investing. But like I said, when we’re
actually capturing it, we’re capturing it as an education, excuse me, as a startup
cost to the C-corporation, meaning it’s due back as a reimbursement since if I paid out of pocket for it, which most of our clients have. So, let’s talk about for
a second how that works. Number one, go to a say, a
real estate education class or stock trading class. Say I spent overall maybe $50,000. Normally that would be
on one of, you know, a credit card or potentially
out of a bank account if you have that cash available. Now I paid for that expense. Now come around, we come
to an Anderson Advisor’s asset protection class
and I want to be able to capture that expense. I may have just looked at it before as something I just spent
money on, like tuition, and that’s all there is to it. But there is a way to capture it. So, come to an Anderson
Advisor’s asset protection class. I now am setting up a C-corporation, preferably within six to eight months of when I may of had
those education costs. The sooner, the better, ’cause like I said, we’re
capturing a startup cost, and after six to eight months, it gets a little bit more sketchy on capturing that expense. However, the IRS guidelines do not state how close it has to be to when you are starting the business. However, we just found
that six to eight months is sort of the longest time you wanna go before setting up that
corporation to do that. So, under the corporation, we capture that expense, because it’s ultimately gonna
be to benefit the business. The corporation then is
able to expense or deduct 5,000 the first year,
then has to amortize it over the next 180 months. However, if I paid for it out of pocket, that full reimbursement is due back to me. So as soon as I have the cash available, I can reimburse myself, as
soon as the cash is available. But the corporation will
have to deduct it over time. But it’s a great way to
capture that education expense. Like I said, normally for those of you who are getting into a
new line of business, you’d be looking at a C-corporation to be able to do this, and it’s incredibly important to get that corporation setup as soon as possible, as close to the time you’re actually incurring those expenses
for the education. This is one way we use
to capture expenses. It’s a great way to do it. As I mentioned in prior videos, the real benefit of having
asset protection structure from the tax perspective is by in fact creating that new taxpayer, meaning the C-corporation, ’cause it does it’s own, files it’s own 1120 return. So by creating that separate taxpayer, it creates some great flexibility and some planning for your business, as well as retirement
accounts, things like that, that you can build off
of that corporation. Normally if a client
comes to me and asks me, you know, maybe I can
only start in one place, what do I need to start with? Normally, I will start with a corporation, just for the flexibility
in the tax planning side, and then build on over time. As always, if you please take, keep taking advantage of
all of our free content. YouTube channel, Toby’s got Tax Tuesday, and there’s a ton of it out there. Anything interests you, of course, please always give us a call. You’re welcome to have
a free consultation. We’ll tell you what we would suggest from both the asset protection side, as well as the tax planning side, so that you can have a
comprehensive solution to how you’re running your business. And as always, appreciate your time and I’ll catch you on the
next Coffee with Carl. (gentle upbeat music)

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