Look at Section 119 of the Internal Revenue Code. Not one in a thousand Americans realizes the fortune that could be saved with tax deductions. You can deduct the obvious things, but you can also deduct much more, such as: Home repair under certain conditions, Home insurance under certain conditions, Some or all meals/clothes under certain conditions, Your heat, phone and other utilities under certain conditions.
You can also deduct many other expenses including: Health insurance, Travel expenses, Retirement plans, Dependent care plans, Auto insurance, College funds...
You can live a much richer life when you make your home your "Financial Command Post" There are literally hundreds of ways you can save on taxes by incorporating your home-based business. The write-offs are many and substantial. By turning your home into a business corporation, you can completely reverse the old way of looking at it. You can stop viewing your house as an endless money pit and start seeing it as a Financial Command Post -- the center of your wealth making dreams.
How do you do this? You need to understand the tax codes. When you look at the tax code books, understanding their content might seem overwhelming. After all they weigh 18 pounds and contain over 13 million words on some 12,000 pages. However, after extensive research, there are a few tax codes hidden within all those pages that I call the Golden Tax Secrets, and you can see how they will work for you.
| IRC# | Golden Tax Secret | Tax Deduction Amount |
| 79 | Group Term Life Insurance. You can receive up to $50,000 in coverage and the premium is not included in your gross income, and it is 100% deductible to your corporation. | $50,000 |
| 74 | Achievement and Awards for Safety and Longevity. These awards have to be in writing and can be up to $1,600 each. In a family corporation, both the husband and wife could receive the awards annually. The wife might receive the Longevity Award because she has been with the company since its inception. The husband might receive the Safety Award because he maintains a safe work environment. These awards are tax free deductions for the company. | $1,600 |
| 105 | Health Insurance. If you already have a health insurance program, the corporation can reimburse you for any expenses paid. | NO LIMIT |
| 106 | Insured Medical Plans. Your corporation can pay 100% of your medical plan. The amount is not included in your gross pay | 100% |
| 119 | Meals and Lodging. When your meals and lodging are furnished by the employer (your corporation) and you are required to live in the house and eat on the premises, then they are paid for by the corporation as a business expense and are tax deductible. These are no limits to the amount spent for meals and lodging. Strict compliance with the code is necessary. | 100% |
| 125 | Cafeteria Plan. Your corporation can provide a cafeteria plan which may include a combination of the above sections. This does not affect your gross income. | 100% |
| 129 | Dependent Care. Your corporation can provide you up to $5,000 a year for dependent care and it's not part of your gross income. | $5,000 |
| 127 | Educational Assistance. Your allotment is up to $5,250, and is not part of your gross income. | $5,250 |
| 162 | Seminars. Expenses (including meals and lodging) for business related seminars are 100% tax deductible to the corporation and are not included as part of your income. | 100% |
| 132(e) | De-minimis fringes. This includes any property or service the value of which is so small that accounting is unreasonable such as coffee, company barbeques at the office and other miscellaneous expenses. Frequency must be considered according to the code. | Open |
| 217 | Moving Expenses. All reasonable moving expenses except meals can be paid for and are not included in your gross pay. | 100% |
| 132(h)(s) | Physical Fitness. You can have a physical fitness facility on your premises totally paid for by the corporation. | 100% |
| 179 | Depreciation. You can deduct or depreciate $18,000 of your office equipment in a single year. Automobiles are not included in this. They need to be placed on a five-year depreciation plan. | $18,000 |
| 243 | Dividends. If your corporation is receiving dividends from another corporation such as stocks, mutual funds, etc. You can eliminate 70 to 100% of the gain. You are only taxed on 20%. If your company received $1000 in capital gains, $800 is forgiven. | 80/20 |
Other corporate tax advantages include split dollar life insurance, key person life insurance, non-qualified profit sharing, non-qualified deferred compensation, qualified retirement (defined benefit) plan, buy/sell agreement and 210 others. Note: "You" and "Your" in the above chart refer to the officers, the directors and key employees of the corporation. Let's examine some of them.
Section 74 covers achievement awards for safety and longevity. It remains one of my favorites. Tip: O'Neil, in his great wisdom, when he was Speaker of the House took out the ability to receive awards for outstanding and meritorious service. The achievement awards are now for safety and longevity. So if you don't electrocute yourself when you turn on the computer or you've been there from the beginning, you can receive up to $1,600 a year in awards. The smart way to take this award is through gifts. I'm sure that somebody wouldn't mind having a $1,600 watch or a $1,600 home entertainment center. That way there's no FICA. All of the expense is deductible to the corporation.
Section 79 covers group term life insurance. You can receive up to $50,000 in coverage and the premiums are not included in your gross income. The premium is totally deductible to the corporation and it's tax free to you.
Section 105 covers health insurance. If you already have a health insurance program, the corporation can reimburse you with no limit and it's not included in your income and is totally deductible to the corporation.
Section 106 deals with insured medical plans except as otherwise provided in this section. The corporation can have a medical plan and can pay up to 100% of the medical plan for you. And this benefit is not included in your income and it's deductible to the corporation.
Section 119 Those of you who operate a home-based business, if you qualify under section 119, and if your home is your business or corporate headquarters, meals and lodging may be a requirement of your employer to stay there on the premises. These can be deductible to the corporation and not included as part of your income.
Section 120 covers a group legal plan.
Section 125 cafeteria plan includes a variety of employee benefits. This could include Section 105 where you receive unlimited reimbursement for health insurance premiums or you could use Section 106 and have a health care plan paid by the company. Or take advantage of Section 127 educational assistance. You can allot up to $5,250 per employee for continuing education and seminars, which will not be included in the employee's income. Seminars relating to your business can be considered continuing education. You can be reimbursed for these expenses under the education category, or you can be reimbursed under Sections, 162 or 212 which covers seminars. There are several different ways to take advantage of these tax-free benefits.
Section 243 The one saving that is very key for me is Section 243 concerning dividends. If your corporation owns stock in other corporations or stocks, bonds, mutual funds and it receives dividends from those investments there could be as much as 100%, but let's say at least an 80%, forgiveness on capital gains on those dividends received by the corporation. For instance, if you receive $1,000 in dividends, $800 of it disappears as revenue as though it didn't exist. The other thing that's really great about the corporation is that it has so many different retirement plans available that you, as an individual, cannot take advantage of. You can put so much more money away in your retirement program through the corporation. There are qualified plans and unqualified plans depending on where you are and what you're trying to do. So it's endless what you can save with the corporation.
But the key is doing it right! It's not about operating in the grey area.
Some people can get very creative and figure: Well, we'll try it this year to see if we can get away with it. But when the government and the IRS want to help you save on taxes, why not do it in the white area of the law so that you can take full advantage of legitimate tax savings and be able to sleep at night?
To learn more about developing business tax strategies, please see our Small Business Taxes page.