Hi, I am Robert Naini, your Spray Foam Advisor, and “The Guy in the Hawaiian Shirt”.
I wear the Hawaiian Shirt as a symbol of freedom and flexibility, something that all business owners should want.
And one of my goals is to help 100 Spray Foam business owners set up their business in a way that gets them freedom and flexibility.
This includes providing spray foam training, education, tips & tricks, business fundamentals and coaching or consulting services.
In this video I want to talk to you about how favorable our economic environment is to be a business owner and help make sure that you are not missing out on anything.
This essentially comes down to the favorable tax implications of being a business owner in today’s economic environment. The US is founded and built on small business owners and every large business at some point in time was a small business.
The tax code is very interesting. The IRS gets a bad rap in a lot of ways, but they do a lot of things to promote the economy in the form of giving incentives to businesses and giving incentives for people to create and start small businesses.
There are a lot of tax deductions available to businesses and business owners, and as a reminder I am NOT a tax professional, so definitely get professional advice for any details you want.
I want to share with you some of the things that I am able to take advantage of as a business owner and some of the things that as a business owner you should be able to take advantage of as well when it comes to taxes for your business.
In some cases, it will affect your personal taxes as well.
Let’s start with when you’re on a job and you get paid twenty thousand dollars for that job, not all that money is going to be taxed by the government right, you get to take business expense deductions off that revenue, and you only pay taxes on your profits in the business.
Some of the costs that we get to deduct include the materials, probably the biggest single cost in the spray foam industry, not just the chemical cost right, we get to deduct all of the materials and supplies that we need to use, plastic, staples, safety equipment, all of these are materials or supplies that we need to conduct our day-to-day operations so they are tax-deductible, this is why we need to keep good records and copies of our receipts in business.
We also get to deduct the cost of labor. As the business owner you are not doing everything in the business, so you are able to deduct labor cost; so anything that you pay your employees, your subcontractors, any expenses for labor you are able to deduct those expenses from your revenue as another big expense.
Another expense is interest, if you have any financing involved in your business, if you pay interest on any loan, for your building, or equipment or interest on any business spending, like on a credit card, that is tax deductible as well.
Any travel for the business, mileage on a personal vehicle, fuel and servicing for company vehicles, and reimbursement for employee’s using their vehicles – all of this is deductible.
Depreciation is probably one of the most overlooked business deductions. Any large purchase with a “long” useful life is typically depreciated over the estimated useful life of that item; this could include vehicles, spray foam equipment, lifts, office equipment, and more. Under some exceptions, the expense of some of these large purchases can be deducted in the year of the transaction, but most of the time the expense is accounted for over the useful life of the item as depreciation.
For example, when you buy equipment for your business, that equipment is given an estimated useful life by the IRS and that estimated useful life allows you to depreciate the cost of that item over the life of that item.
Some of our big expenses are actually going to be fully depreciable in one year, the year that you purchase and put them into use, but others are going to depreciate over three years, five years or seven years depending on how they’re used and how they’re viewed by the IRS.
You are going to have to talk to your tax professionals about how exactly you should handle this in your business and what items are going to qualify for what rate of depreciation – whether it is one year, three years, five years, seven years or so on.
Equipment for an SPF business is a significant cost that that your business incurs, generators, compressors, plural component proportioning equipment, the trailer, truck or box truck, all these items are going to be depreciable assets.
Some of the smaller ticket items, like a computer, smart phone or tablet, are likely going to be fully depreciable, or documented as an expense, in year one and you will be able to deduct the full cost of that item.
Insurance is another key deduction, make sure you are insured properly. Work with good insurance professionals that have experience working with spray foam businesses or that are at least familiar with spray foam businesses. You should be concerned with several types of insurance – worker’s compensation, your equipment, your vehicles, your warehouse or office, and liability insurance.
Insurance is intended to protect you, your business and your people from a large, unexpected loss, and the insurance premiums are deductible for the business.
Legal and professional services are deductible.
So, work with lawyers on your contract templates, this is their profession, and they will be able to help you with legal documents better than anyone else.
Work with a CPA or tax advisor, they provide a professional service, and their fees are deductible.
Finally, education is deductible. When you invest in your company, when you invest in your people, when you invest in the assets around you and make them better, you make your company better and the tax code rewards you for investing in your business by allowing you to deduct these expenses.
All of this means that your business starts with a top-line revenue number, and you are allowed to deduct all these expenses, and more, to reach taxable income.
And it’s a great thing that we are taxed on the smaller number, revenue less expenses, because this means we pay less tax, and we are rewarded for investing in our businesses.
The IRS does not tax the dollars that we put back into the business.
When we invest in hard assets and real improvement in the business, through education, books, audio programs, memberships, etc. all these things are tax-deductible to the business, if they have a direct relationship to the business that you operate.
At the end of the day, make sure to talk to your CPA, accountant or tax advisor about these concepts and the best way to implement them in your business.
I just wanted to share with you my experience with my business and my taxes, and help you see this perspective and the value of investing and reinvesting in your business.
If you found this video helpful then it would probably be valuable to your friends in the spray foam industry, so help us all out and send it to three or four people that you know.
Additionally, if you have any questions, want info on a specific topic, or want to learn how Spray Foam Advisor might be able to help you or your business, you can email us at [email protected].
This is Robert Naini, your Spray Foam Advisor, and “The Guy in the Hawaiian Shirt”, thanks for checking this out and catch me on some more videos.
