Tax Reduction Podcast

Episode 33. LLC Tax Strategies

• Boris Musheyev • Episode 33

Share episode

Interested in Tax Strategy for your Business? Send us a message with your email address and we’ll help you get started!

How can LLC owners pay less in taxes in 2025? This podcast breaks down key tax strategies, deductions, and tax savings opportunities for LLCs. Learn how retirement contributions, depreciation, hiring family, and optimizing your business structure can help you legally reduce your taxable income and keep more of your money. We’ll also cover business meal deductions, credit card strategies, and tax-efficient ways to structure your LLC for maximum savings. Understanding these LLC tax planning strategies is crucial for maximizing write-offs and lowering your tax burden. Plus, we’ll discuss how LLC vs. S-Corp election, Section 179 deductions, and bonus depreciation could impact your business. Don’t miss out on these valuable tax-saving tips.

I've put together this FREE resource for you:

7 Write-Offs Every S-Corporation Business Owner MUST Know
🆓 Download FREE PDF here: https://7taxwriteoffs.com/

Ready to start saving money on your taxes?
☎️ Schedule your FREE Tax Advisory Session: https://taxplanningcall.com/

🤩 If you are looking for easy-to-use payroll software, I personally use and recommend to my clients Gusto Payroll Software - https://gusto.com/r/boris466

P.S. When you sign up for Gusto, you get a $100 Visa gift card

*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, ...

Speaker 1:

If you've got a profitable LLC, then in 2025, you can use six tax strategies to maximize your tax deductions in your LLC business and maximize your tax savings. Now, number one I'm going to talk about how you can use your business credit card to your advantage to actually have tax-free cash and prepay expenses with your credit card. The third thing we're going to talk about is how toation Section 179, a bonus depreciation for your LLC, especially now with the changing tax laws coming up with President Trump, and the bonus depreciation is going to back to 100%. So stay tuned, we're going to dive deep into that and see what's best for your business. The fifth thing we're going to talk about hiring family members, especially your children. Such a huge advantage to hire them from an LLC rather than an S-corporation. That is exactly what we're going to talk about. Six but not least, how to optimize your LLC for an entity structure to save additional 15.3% in taxes. Now let's dive right into this. Ready, let's go.

Speaker 2:

Welcome to the Tax Reduction Podcast for money-making entrepreneurs with Boris Mushaev. Boris has helped entrepreneurs across the United States collectively save millions of dollars in taxes with the power of tax planning and advisory. The only way you, the business owner, can save money on taxes is by using proactive tax strategies, and this podcast is all about saving you money on taxes. Boris will share with you in-depth and easy to understand tax reduction strategies that you can implement in your business within 30 days or less. Let's jump into today's episode.

Speaker 1:

Great, awesome. Now let's talk about maximizing your meals deduction. As you probably already know, when you go to your accountant and you give them your profit and loss or expenses, and let's say you spent $7,000 on meals, your tax preparer or your accountant just puts $3,500, 50% of that 7,000. And you're like wait, I don't understand. I spent $7,000 on the meals. Why is only 50% tax deductible? Unfortunately, that is the law, but not for all types of meals. You see, when you take out your employees or your business contractors, vendors, partners in the business to discuss your business, that will benefit the business all the meals are 50% deductible. Even when you travel overnight, the meals are 50% deductible. Or even if you travel at all for work right, all the meals, if it's for the business, are 50% deductible. Or even if you travel at all for work right, all the meals, if it's for the business, are 50% tax deductible. So when you submit that profit and loss statement to your accountant to prepare taxes, what they don't know is the category of each meals. Because when you throw a holiday party which most business owners that I know throw a holiday party for their employees I'm talking about all employees, not just highly compensated employees or employees that are also your family members. We're talking about all employees in a restaurant or even in your home and all the food that you buy. That is 100% tax deduction for your business. Now, when you submit your profit and loss to your accountant, they don't know the category of the meals. So you want to make sure you tell them. What about instances where I've had tax advisory clients for whom we do tax advisory, not just tax preparation, which is probably what your accountant is doing? What about those meals? You do promotional events, right, you do. I don't know what. Is it a meetup or some kind of an event where you're promoting your services and you're catering food there. All of that is 100% tax deductible, but your accountant doesn't know it because all they see is the name of the restaurant and name of the caterer and they put it on your taxes. You're too busy to check. So what I would recommend on your profit and loss, identify those two meals. There's a couple of other categories where meals could be a hundred percent tax deductible, but I'm going to leave that to you to speak to your tax advisor, because taking a meals deduction could really accumulate to a lot.

Speaker 1:

Now let's move on to the second tax strategy. One of my favorite ones is using your business credit card. Now, if you are a business owner and you don't have a cash rewards credit card or miles rewards credit card, you need to get one right now. I'm going to put links for the credit cards that I personally use. They give you a huge cash back 2% cash back and if you spend it on a business, it accumulates. Now why is that important? If you spend it on a business, it accumulates. Now why is that important? Those rewards are tax free to you, the business owner.

Speaker 1:

The mistake that you do not want to do, okay. The mistake that you do not want to do is what is that? Redeem a credit against your statement? Okay, because what happens is that that reduces down your expense, which now would have been tax deductible. Instead, you can request a credit card company to give you cash back mailed to your personal address, and none of this is taxable. Now you might say well, boris, am I cheating the IRS over here? Is it because it's coming to my personal name? No, just credit card rewards.

Speaker 1:

The cash back rewards are just not tax deductible. The cash that you receive from credit cards right? Those rewards for spending a credit card is just not taxable. Okay, the miles that you use for travel is not taxable. One of the biggest mistakes you can use is use the miles for business travel because you're not getting a business deduction. What I personally do is that I rack up a lot of miles on my Amex and I use it for my family travel with my children, because none of that is tax deductible. I don't want to use it for business travel because then I'm losing out on my deduction.

Speaker 1:

Now there are some cases where credit card rewards are taxable and those are when you are, for example, opening an account. Like they incentivize you to open an account. They give you $500. If you spent like I don't know, $7,000 in three months, that would be tax deductible and you bet they're going to give you a 1099 for that. But the credit card rewards are tax-free. Use it wisely, okay. Now Another thing that you can use your credit cards for is towards the year end.

Speaker 1:

Let's say you are in the month of December, your LLC has huge expenses coming up in January for which you have to pay. What I would recommend, if you have enough cash flow, put that on a December credit card, because that's going to be due in 30 days anyways. But whatever you put on a December credit card, even though you haven't paid cash for it, it becomes a tax deduction. This is no different than buying equipment for your business, not paying any cash for it, financing it, and this becomes a tax deduction for you, okay. So use your credit card wisely.

Speaker 1:

Again, use your credit card wisely. At the same time, you can actually prepay some of the expenses up to 12 months in your business and take a deduction in December, even though you prepaid it for the next year. Definitely speak to your tax advisor. Hey, I've heard this guy. Boris said I can prepay some of the expenses. What are those expenses? There's a number of expenses that you can actually prepay. Definitely speak to your tax advisor. Not all of them can be prepaid, but a lot of them can be prepaid. Moving on Third tax strategy retirement tax strategy there's so many retirement options for your LLC.

Speaker 2:

Before I get into that just a quick break. Business owner must know. In this PDF you can find seven tax strategies that you can start using in your business to instantly start saving money on taxes. Click on the link in the description below for a free download.

Speaker 1:

Awesome, thanks so much. Let's talk about retirement as an LLC. Whether you are an LLC or LLC taxed as an S-corporation, you can really take advantage of one of the three retirement options. Now, there's a lot out there. Speak to your tax advisor. That would be best for you. But generally speaking, these are the three that benefits most business owners that I work, that we do tax planning for Number one SEP IRA. If you've got an LLC, you have no employees in your LLC, then SEP IRA would be the best option. If you're a single member LLC, you can put away 20% of your profits up to a limit to a SEP IRA. The second thing that you can use the second retirement strategy again single member LLC, no employees solo 401k allows you to put away more than SEP IRA. Another retirement tax strategy that you can use for your business okay is 401k with employees. Now, if you've got an employee, sep IRA is not going to work for you. Solo 401k is not going to work for you, but safe harbor matching with 401k will still work for you. You can still defer a pretty good amount $23,500, still put away, but only match 3% for your employees. This could be a great tax strategy for you.

Speaker 1:

The biggest topic right now is bonus depreciation. Now that President Trump is back in office, he's looking to extend 2017 Tax Cuts and Jobs Act. One of those extensions, okay, is bringing back 100% bonus depreciation. Now there's a huge misconception and misunderstanding among the profitable business owners because they're working with a tax preparer and not a tax advisor. They think, oh my God, we don't have bonus depreciation. I cannot take a hundred percent tax deduction yes, you can on assets that you buy. Okay, why? Because we have something that is called section 179 that allows you majority of small business owners will qualify for that, even though there are some limits will qualify to take 100% tax deduction on assets and equipment they buy. Now, the bonus depreciation with President Trump, part of the Tax Cuts and Jobs Act. What it did is that it enabled the business owners to take 100% tax deduction under a vehicle that is over 6,000 pounds. Of course, we're assuming that the vehicle is 100% used for business, okay, but just because we do not have a bonus depreciation, majority of assets that you buy for your business equipment and all of that stuff is still subject to 100% Section 179.

Speaker 1:

Now the planning with your tax advisor comes in, when, right before year end or even actually after the year is over. It could be in two categories. Let me explain. If you're buying the asset before year end, you are we're going to assume you need this asset. You're not just doing it for the write-off okay, because if you're doing it for the write-off you're still more money out of pocket. But you you're doing it because you need it. You're going to speak to your tax advisor, figure out hey, I do need this asset, but after the year is over. The second category is that do I need to take a 100% deduction on it? And you'll be surprised, when I'm doing planning for a lot of my clients, we don't always take a 100% tax deduction on the asset that they buy. It really depends what bracket are they in this year and what bracket are they in next year?

Speaker 1:

And the beautiful thing, what I love about Section 179, where it allows you to get 100% deduction you can actually pick and choose how much deduction you want to take this year and then spread it over the life of the asset. I'll give you an example. Let's say you bought an equipment for $100,000. $100,000. As a matter of fact, you didn't even pay cash for it. You financed it. Okay, you took it on a loan or on a note. It's a credit. It's not a car, it's equipment for your business. Okay, $100,000. The good news is that you can still take 100% deduction even though it's if it's financed. But if you're working with a tax advisor and you advise, it tells you you know what? I don't think taking a hundred thousand dollar deduction for last year is going to make sense for you. Okay. And we don't want to use bonus depreciation because, even though it gives you a hundred percent or forty percent or sixty percent, because what we really need out of this hundred thousand dollar deduction to get you to a perfect spot is, let's say, seventy thousand dollars. Can you pick and choose how much depreciation you can take with the section 179? The answer is you got it. The answer is yes. Okay, we've actually done it with a client that purchased an airplane. Okay, then, for their business legitimate business expense we'll look at a deduction. Said bonus depreciation was too much. We didn't need that much deduction, 50% of it, for example, we also didn't want. We needed a good sweet spot and I think our sweet spot was about 65, 70% Amazing tax strategy. The rest was carried over to the next year and depreciated over the course of the life of the asset. So definitely a great planning opportunity for your LLC. Planning opportunity for your LLC. Now.

Speaker 1:

The fifth tax strategy that you can use in your business is hiring family members. What I love about single member LLCs is that when you hire your children to work in your business, not only can you pay them up to $15,000, which is the limit of the standard deduction for 2025, which means they don't pay any federal income tax on it, but you as a business owner because you are an owner of that LLC but also a parent of that child you don't pay Social Security and Medicare taxes on the wages you pay to your children, and that child that receives money from you also does not pay Social Security and Medicare taxes on that income. Now what's really really important the mistake that I've seen across business owners is that what do they do? They pay their children. Oh, I can pay my child $15,000. You know what? I'll pay them $1,250 per month. That'll be $15,000 per year. Just going to write them a check, put it in their bank account and call it a day. Please do not do that. What you need is to follow the rules. If your child really works for you, great. Do not hire your 3-year-old child or a 2-year-old child that is still in diapers, is at home with a nanny, with a babysitter, but is getting paid from you for working in your business business. Okay, based on my experience, what I've seen is that a capable child that's really capable to work help generally all parents right In any industry. It's ages 10 and up. You know there is a legitimate work for them to do in the office. You know shredding papers, filing, whatever that may be. I'm sure you can find them good work that they're capable of. Pay them based on the hours and the time that they work. Don't pay them just gross amount because you can take a deduction. Okay, I hope that is clear, but definitely a great opportunity for you to explore with your tax advisor.

Speaker 1:

Next one, last but not least, optimizing your entity structure. Now, if you've got an LLC I don't know if you know by now, but having an LLC as a single member owner subjects you not only to federal and state income taxes but also to Social Security and Medicare taxes, which is called SE tax self-employment tax of 15.3%. That means for every dollar, for every $100 that you earn, you pay extra $15 on taxes when you're a single member LLC, or even if you have partners. The best strategy against that, to help you minimize that tax liability, is converting your LLC to an S corporation. Now a lot of business owners are laid to file for an S corporation because they're not aware of it. Right, you have 75 days, which is by March 15th, for that tax year that you want to be an S corporation. So let's say, right now you're in a month of I don't know, june or July, whatever that may be, and you're like oh, I'm late. You speak to your tax advisor and I'm assuming you've got a competent tax advisor that says don't worry, we can still file a late election because IRS allows you to file a late election. Explain your reason. Hey, I didn't know, it was a mistake. Now we would like to make a late election.

Speaker 1:

Under this ref proc rule that you IRS allow, you can actually become an S corporation. Pay yourself salary, save yourself 15.3%. The best thing about an S-corporation is that it is also a pass-through entity, even though if it's an S-corporation because it is not a C-corporation income gets passed through to the business owner. They don't pay distribution taxes. They don't pay distribution taxes. They don't pay corporate taxes. They only pay taxes on the personal income, taxes on that profit, and they pay that 15% self-employment tax only on the salary of the S-corporation. Now, what I don't want you to do is, right after this, we close everything and go form an S-corporation. If you're not, you got to speak to your tax advisor. You only have to do this with the help of your tax advisor. Please do not do this without the help of your tax advisor. Thank you Until the next time.

Speaker 2:

That's it for today's episode. Be sure to check out the description below for some free tax reduction resources that Boris put together for you. If you're ready to work with a tax advisor on your tax planning, be sure to schedule your call by heading over to wwwtaxplanningcallcom. That's wwwtaxplanningcallcom. And be sure to subscribe to our podcast to be notified when the next strategy is released.