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Hit 7 figures but losing 5 figures to taxes? Earn a 6-figure income but feel financial chaos? Welcome to the show helping you Simplify Your Numbers.
Most business owners in the $1M–$10M range feel like "passive payers"—surprised by a massive bill every April and wondering why their hard work isn't reflected in their bank account. Host Fabrice Metan, a veteran CFO and tax strategist, cuts through the noise of complex financial data to provide straightforward, actionable insights for the "7-6-5" entrepreneur.
This podcast is the bridge between traditional bookkeeping and high-level advisory. We move you away from a reactive "compliance mindset" and into a proactive strategy where your business becomes your greatest wealth-building tool.
Stop being a passenger in your own financials. It’s time to simplify your numbers, maximize your profit, and hold onto more of what you earn.
Subscribe to join the 7-6-5 community and start your transformation today.
Ep09
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[00:00:00]
Stop Overpaying Taxes
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Fabrice Metan: There are businesses paying tens of thousands of dollars every year in taxes simply because they're afraid of taking the legal tax deductions that they qualify for. And no, I'm not talking about illegal loopholes or shady tax strategies. I'm talking about actual tax strategies written in the tax code and detailed in ways that you can structure properly and actually take advantage of.
Let's dive into it.
That
[00:01:00]
Why Deductions Exist
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Fabrice Metan: So if you remember what it was like when you were an employee versus now that you've switched to a business owner, sometimes there's a little bit of friction. You're, you're almost feeling like this is too good to be true. How come I was never allowed to do certain things, and now that I'm a business owners, I can take those deductions?
The truth is, the tax code is more of an incentive plan. We're getting incentivized to do what the government cannot do on its own, so that we can create more jobs, we can continue to reinvest in the economy, reinvest in the things that the government actually would like us to do. Hence, the reason why business owners tend to have more opportunities [00:02:00] to find legal deductions that they can apply to their tax situation rather than what is offered to W2 employees.
And so you're not going crazy, right? You're not doing anything wrong. At the end of the day, the tax code does not penalize you for legal deductions. Most of the time, they would penalize you for poor documentation. And so if you understand what the tax code is looking for, exactly what it's incentivizing, you can take advantage of that and apply that to your personal situation.
And so I wanted to go over just a few of those amazing deductions that we get to have as business owners that sometimes sound too good to be true, as I mentioned before, but are 100% legitimate.
Hire Your Kids
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Fabrice Metan: The first legal deduction that sounds too good to be true is hiring your kids in your business. The way the tax code is [00:03:00] written allows us to hire kids under the age of 17 and be able to take 100% of the tax benefit from our business while the kids have no tax implication.
Depending on the structure of your business, you can even avoid the FICA taxes and the unemployment taxes on those wages. Now, the reason why we would be incentivized to do that, because at the end of the day, if you have a successful business, the government would want that business to sustain and have longevity.
What better way to create longevity than to pass it down to the next generation? So if we can have our kids learn the business while we're still in it at a younger age, there's a much better chance of them being able to take over the business down the road. But in addition to that, just being able to fund their account so that there's more that the kids are able to do at a, at a younger age, not just the activities that they can partake in, but [00:04:00] also being able to learn how to manage money, how to invest, how to be financially responsible early in life so that when it's time to even go, you know, find a job or essentially start their own business if they wanted to, they're a little bit more prepared.
And so we get the opportunity to do that when we own a business. We can actually keep the money in the family, hire our kids, and continue for generations after generations to maintain the business in the economy.
Use The Augusta Rule
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Fabrice Metan: The second tax strategy that sounds almost too good to be true is the Augusta Rule. So the Augusta Rule actually was enacted in the '70s, and it was a rule that came about because of the fact that the Masters was happening in Augusta, Georgia, and they were allowing essentially the residents to rent their home as more of an incidental event for no more than two weeks, have the room rented to people that are visiting the area, and essentially not have to claim those taxes.
[00:05:00] So the people, the resident of that area lobbied Congress to be able to have that opportunity and were given that opportunity by the tax code. Well, that essentially stayed in the tax code and now allows business owners to use that as an additional tax planning strategy, where in essence, as long as you are renting your home to your business under s- 14 days, you get an opportunity to shift that income from the business over to you tax-free while creating a business tax deduction.
But it has to be very specific because it's still tied to what the market would charge for the same space for the same purpose. So in other words, if, say, for example, you're bringing in your employees in your home for business meetings, let's say once a month, so it happens 12 times in a year, right?
And you have some sort of your basement used as a conference room like you would in a hotel, you could call the hotels around your area to find what the market rate would be and apply that very same [00:06:00] rate to you renting your home to the business for that specific purpose. And so essentially, this is a, a case where the IRS is incentivizing us to do certain things that, you know, make sense for the areas where we live in.
If you ever think about the fact that the rule was applied in the '70s in an area where today I believe the population is only about 200,000 people, you have to imagine that it is very possible that at that time there wasn't enough hotels, right? Enough places where people could stay. And so it made sense for the residents to rent their homes.
But then if you-- if they have to be taxed every single time that that happens, now there's not as big of a benefit to do so. And so that is the reason why they lobbied for that to be completely tax-exempt, and they were able to win. Now we get to take advantage of that strategy as well.
And so when you think about, you know, in other cases where there's big events happening in certain cities where there may not be enough places to [00:07:00] accommodate, right?
The influx of traffic that is coming in, this makes perfect sense. It helps the economy, it helps the area, it helps the government, and this is why we get incentivized to do so.
All right.
Home Office Remodels
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Fabrice Metan: So the third legal deduction that sometimes seems too good to be true is the opportunity to remodel a room in your home specifically for the business, right? And so you have to think about the idea that sometimes, depending on how big your business is, you may not be able to afford a commercial space.
It may not make sense for you to go out there and actually rent an office for that business, right? So the IRS allows you to have a dedicated exclusive space in your home that you use for the business, because it allows you to keep your expenses low. You're already there, you already live there, you're already paying the rent or the mortgage, and now you get to use that asset to benefit your business in a [00:08:00] way that makes you more profitable.
Why do they want you to be more profitable? Obviously, to charge you more in taxes, right? Because you pay taxes on your profit. But essentially, to allow you to also be more successful as a business. If you can keep your expenses low, you have an opportunity to grow before you decide to go have your own commercial space.
But one thing that we should probably think about when we decide to remodel an area for the business is that the specific remodeling expenses that you have should be things that can obviously be tied to your business, right?
So if you have, for example, a podcast studio, or you may have you know, a, a, a shop that you use for construction, right? Where you keep your tools, your equipment, those kind of things, right? So it needs to be something that obviously is not being used for personal use, but is there specifically to benefit the business.
Vehicle Write Offs
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Fabrice Metan: So the fourth legal deduction that I'd like to talk about is the vehicle deduction. Not necessarily because business owners are not aware of it, but [00:09:00] because sometimes they don't quite understand how they're supposed to take that deduction, right?
So the IRS doesn't necessarily scrutinize you for using a, a personal vehicle for business or for that deduction specifically. They scrutinize bad record keeping. So if you're going to use the mileage strategy, where you're looking at your business miles, you definitely wanna be able to have something that backs up that these are the total miles that I've actually driven for business.
If you're going to use the standard method, then you wanna make sure that you have purchase agreement of the vehicle, the receipts for the expenses tied to that vehicle so that you can back up that expense. But you always want to think about percentages, right? How much am I using that vehicle for business versus personal?
And am I limiting my write-off based on that exact percentage? As long as it is done correctly, the IRS is more than happy to reward you for that
But why does the [00:10:00] government actually want you to buy a vehicle as a tax benefit? You have to think about the implication of vehicle sales to the entire economy. Our manufacturing industry is driven by vehicle sales, right? So the more we buy, the more we're keeping all of those jobs, all of those businesses in business and profitable. And so vehicles especially also because they tend to be a depreciating asset over five years, it means that every five years, more than likely, you're needing another vehicle, right?
You also have to think about even the financing industry being able to loan you funds for that asset and earn interest on that. So there's multiple layers to buying vehicles that help the economy and make sense for the IRS and the tax code to incentivize us to buy more.
Education Expenses
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Fabrice Metan: And last but not least, education expenses.
Now, think about the fact that at the personal level- You might be able to get some education [00:11:00] credits, right, for your tuition, and you might be able to write off a certain portion of your student loan interests. But at the business level, 100% of your education expenses become a tax write-off. The government actually wants better business owners, people that are savvy enough to maintain their business, to continue to grow their business, and so they continue to educate themselves to be more able essentially to do well.
And so as a business owner, you get to write off 100% of those expenses in your business, perfectly legal based on the tax code.
So at the end of the day, the IRS wants to incentivize education, right, as a whole. But an individual that gets more educated gets in a position to get a better job, probably make more money, and yes, get taxed a little bit more because they make more, right? But that is one individual. When the entrepreneur gets educated, he gets an opportunity to grow his business, but also to [00:12:00] create more jobs.
And so now we have an opportunity to have more people paying more taxes and getting the economy to move. And so this is why entrepreneurs tend to have that opportunity to write off 100% of their education expenses versus at the individual level there might be some limits to that write-off.
Strategic Closing Tips
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Fabrice Metan: So in closing, the tax code was designed to incentivize business activity, investment, hiring, and growth. The key is not being aggressive. The key is being strategic, organized, and properly documented. We'll see you next time
[00:13:00]