Welcome everyone to another episode of the Contractor Millionaire Podcast. I am your host, Manny Tajada. I'm the owner of Landscape Maverick. We're a marketing and branding agency for landscapers here in the United States. We've got a very, very special episode for you guys today with a very, very special host. Well, special guest, should say, Jim Flauaus, my personal accountant, guys, my personal tax strategist. Super excited to get into this. Today's topic, guys, is going to be the top three mistakes that landscapers make at the end of the year that cost them thousands. Now, like I said, we have a very special guest. Before we introduce him, I want to introduce him first. So Jim, he rescues landscapers from getting stuck in the mud due to the single biggest business expense that they incur every year, which is taxes. Now, Jim has over 25 years. He's prepared thousands of tax returns. He's my personal tax strategist, and I am super excited to get into this episode. Jim, go ahead and introduce yourself. Hey Manny, great to be with you. Yeah, I've worked for years with contractors, landscapers, other home service pros to uh help them just reduce their bookkeeping stress, stay out of the weeds when it comes to overpaying the IRS. So I'm excited just to share some things today that will help folks. Boom, let's go Jim, I'm excited, I'm excited. And guys, like I said, Jim is my personal accountant, he is my tax strategist, so this is why I have Jim on, he is an expert, he works with landscapers, bunch of home service contractors. So Jim, let's get into it, tell us some of the mistakes that landscapers make end of year, because of course it's November 12th, 2025, we're recording this, it's end of year, guys are probably stressed out, man, did I keep my receipts, did I do things right? So what are some of the biggest mistakes that they can afford, Jim? Let's get into that, let's start there. Well, I think you really just have to start from acknowledging where the typical contractor is, whether they're a landscaper, a pressure washer, any home service pro. And the reality is, contractors are so busy running their business that things like the record keeping, the receipts, they hate IRS regulations, uh the payment of taxes, finances, money. all kind of gets pushed to the back burner because what are you doing all year? Well, you're running projects, you're making sure your crews are on the job, you're trying to generate revenue. So that's job one as opposed to bookkeeping and taxes. didn't go into business to be a financial expert, you're running the business to make money. So that's really kind of the... the weight of the stage is set. So here we are in November and yeah, there's a lot of things that landscaper could be doing differently. the three in the beginning, as we're at the end of the year, generally they don't take an intentional or a proactive approach to taxes to begin with. A lot of times a landscape contractor is intimidated. They don't wanna reach out to a pro. Maybe they don't understand numbers. They certainly don't get the tax code. So they're a little intimidated or reluctant to reach out to someone like me. But the reality is, I mean, we can be saving you thousands and the fees that you pay us typically are very small relative to the time and the money we're going to save you. So one, just being proactive. Number two is they don't take advantage of year end strategies. Example, bonus depreciation. Right? We can talk more about this, but there's lots of equipment in this business, whether it's trucks or trailers or skid steers or mowers or chainsaws or even office equipment. These are things you can make purchases of and really maximize this year on your taxes. And then third is they just don't have the right entity structure. And we can talk more about that, but just, you know, the way you set up your business, people don't realize they just get into the business. They start their business or trying to. to make money and they just don't take the step back and say, how should this thing be structured? It can save you thousands. So those are three things that just right off the top. 100 % Jim and I agree 100 % I mean these guys are buying equipment because we're Most of our landskeepers that are listening here a lot of them were actually our clients right into the hood us up Hey, look, we just got our truck wrap. We just got our skid steer wrap and I'm like, I'm excited Let's go and I'm just like, hopefully you're making the right decisions purchasing it in the right way To make an impact then before we dive deep Jim into like each one of those topics here You know when you say you can save thousands, can you be like a little bit more exact? And what does that mean exactly? Like are you saving two thousand per year? Are you saving five thousand? What's the difference? differentiated here like when it's done right versus when it's done wrong. Well, I mean, give you an example. had a contractor here recently and their taxable income was like 18,000. Okay. Excuse me. No, their tax liability. Their actual tax bill was 18 grand. Before we started to sit down and say, okay, what can we do to reduce this thing? So they're looking at a bogey of 18 grand. And for example, just setting up the right entity structure, taking advantage of... bonus depreciation on some of their equipment purchases, we saved them like 10.5. So they reduced their, from 18 down to like 8,050 bucks was their tax liability just because of the sum of the moves we made. And we did that before year end. So it was effective. It reduced their tax liability and they weren't gonna send an additional 10 grand onto the IRS come next April. Wow, that's huge. That's huge. And we were talking about it for myself too, Jim. I mean, I'm going to be swapping over to an S Corp here very soon. And that single change can leave the thousands. So man, I'm super excited. And I don't know if it's too much to ask Jim, but like that person, what was their revenue? Like more or less, what was the revenue for them to have to pay 18,000? Were they above a million, below a million? What was their revenue size? Below a million, I forget what the exact revenue was and you have to realize when you arrive at an $18,000 tax bill, it not only depends on what the income is, but are they married, are they single, what kind of expenses did they have, did they make estimated payments during the year? all of that factors into the 18. But yeah, it was a dramatic savings. And these are legit savings. A lot of times you see stuff on social media or you... hear stuff on a podcast and it's a so-called tax expert. um But you wonder, are these legit strategies or are they just, you know, doing stuff that's going to get me in trouble with the IRS? And I'm talking about strategies that are based on the IRS code or that have been tested in US tax court. So they're legit. They're code-based. We do not want to save you money and then have you in trouble with the IRS because you are trying to push the envelope. That's a great point. That's a great point. And I can't wait to get into like what's legal, what's not. Because you're right, and I see those videos all the time, on Instagram or Facebook. There's some guy, and I hope they're credible, but they're saying, oh, can hear how you pay zero dollars on taxes, and then they read out these things. I don't know if it's legal or not. Of course, we don't want to get in trouble with Uncle Sam. But that's a great point. That's a great point. But Jim, let's get into the first one. You mentioned, I think, was failing to plan, not being proactive. So what does that mean? Is tax planning the same as know, tax preparation, what is that, how can guys get, you give us some more detail on that because I know a lot of guys are listening that want to get proactive. How do they get started? How do they do that? What does that mean? oh typically happens at tax season, right? A contractor takes their receipts or their books or their P &L down to the accountant and the CPA adds it up. The CPA puts last year's numbers on last year's tax forms. It's like writing history, very reactive. And then, you know, they call the contractor and say, hey, here's what you owe. You know, thanks for your business. We'll see you next year. And it's like... That's not the way you want to do it. That's tax preparation. It's all reactive. It's after the fact. Tax planning or tax strategy, on the other hand, is a proactive exercise. And it's not complicated. It doesn't have to be expensive. It doesn't have to make your brain hurt because you're trying to understand the tax code. It's really more of a matter of, wouldn't it be better if the contractor sat down with a tax pro on Zoom or in person and just... reviewed, let's say in July, half the year is under the bridge already. So in July, you've got a pretty good idea of what you've made through the first half of the year. You can begin to annualize, okay, what is my income going to be? What is my tax liability going to be if I do nothing? What should I be making in estimated quarterly payments so I'm not getting hit with those penalties? And then what tax strategies can we implement? so that I can reduce my ultimate tax liability. And so that's what we do is we sit down mid-year and we have that conversation. It might be a 45-minute conversation. The um contractor typically will, if we're doing their books, we'll pull up their P &L. If someone else is, they'll send us a P &L. We'll know what they made. If they're married, we'll know what their spouse's W-2 is year to date, what their contributions are to IRAs, what they're doing in investments if they have them. if they sold a house, if they have rental property, the whole thing. It's like, let's look at this and then let's project. And people, when they leave that mid-year meeting, they tell me, man, I just feel like I had a uh weight come off my shoulder, because at least now I have some clarity. I feel like I have some control over my numbers, over my money, over my taxes, because until I sat down with somebody like this, I was just kind of stressed out, losing sleep at night, not really knowing where I stood. And so that's one step. And we do that all again in November. Either this time of year, like I've got tax strategy meetings scheduled this week, next week into the first week of December. And so that's when we do it again, right? Now you've got 11 months, 10 months, 11 months under the bridge. Where do the things stand? What's the tax bill looking like? And now what can we really do between now and year end while we've still got roughly six weeks here? between now and December 31st. What can we do? How do we do it? What do we do it? When? So we give specific instructions. We help implement the strategies. And that's where you come up with the savings of, like I said, several thousand dollars could be in the example I gave about 10-5 just in tax savings, just as a result of sitting down, having some meetings, doing some projections, and then implementing some strategies. So that's the difference between tax prep. which it doesn't matter how good your CPA is with all your receipts and paperwork on April 15th. They can't really do much about that tax bill, but you can do stuff in July and in November and December before the ball drops in Times Square. So that's the difference. Yeah, and I freaking loved that. I love that Jim. You're right. Because that's been me, honestly, to be honest. And again, I'm not a landscaper. We do marketing for landscapers. But even with myself, I would just go to a local guy, bring a copy of my, you know, P &L, bring a copy of, you know, anything else that I had to give them. And they'll just, okay, here, your bill is $200 and you're good to go. But I'm like, okay, am I saving money? Am I losing? Where can I optimize? So that's awesome. And then what if there's guys in the middle, sitting in here, because we want to be actionable. I want these guys to take a nugget and go and run with it. What's the one or two three things that guys can do now in November that can help them save a little bit of money for 2025 the year or two? What are those two three things they can do right now? Well, I mean, obviously there is the opportunity to, if you have the cash available, to make some year end purchases. You want to be wise about this, right? You don't want to spend 40 grand and get a $10,000 tax savings and then you're, you know, paying the rest of that 40 grand off over the next two or three years and your cash pour because you got a tax reduction. You know, every tax strategy has to be specific to the contractor themselves. You hear all this great advice on social media, hey, I created an LLC and then I wrote off my car. um Okay, how much did you pay for the car? You you see these $75,000 F-150s or these 120 grand Lexuses that they're buying. How'd you pay for that? know, the last thing we want is you to go out, you buy a piece of equipment. And you just you get a loan on a thing and then you're cash poor for the next three or four years going after a tax deduction. It all has to work together. You can't be money wise and tax foolish or tax wise and money foolish. So we talk about that. But that's one thing. Equipment. I mentioned a list of it earlier, right? Trucks, trailers, skid steers, mowers, chainsaws, all that stuff. can buy now. Let's you spent 30 grand on a skid steer. 20 % tax bracket, what's 30 % of 30 grand or excuse me, 20 % of 30 grand. That's about six grand. So that's going to be your tax savings. Did I do that math right? Yeah, 30 times 12 grand, I'm sorry. So I'm in the in the light here of you know, and I'm the accountant, I should know my numbers, but 20 % of 30 grand is that's the tax. So don't think I'm going to go out and spend 30 grand and I'm going to get a $30 tax$30,000 tax reduction. No, no, no. The reduction is whatever your tax rate is. So if you spend 30, you're in the 20 % tax rate, you're going to save 12 grand in tax. So that's kind of the exchange. So OK, what equipment can you buy, cash flow permitting? Can you make any retirement contributions? If you're self-employed, you don't have to just put money into an IRA. You're limited to what, six grand, seven grand, depending on your age. No, you can have a SEP plan and if you made 80 grand net this year, you can contribute up to 25 % of that. That's another 20 grand. So that 20 grand goes into a retirement account. It won't get taxed for years. And this year, guess how much comes off of your taxes? 20 grand, 30%, that's another six grand in tax savings. So purchases of equipment, retirement contributions, and then big one too is What is your entity structure? And so many landscapers are set up in an LLC because that's what their attorney or that's what they saw online, right? Hey, set up an LLC and save on taxes. Well, an LLC doesn't really save you anything on taxes. The real key is you want to save on self-employment taxes. So that's a whole nother strategy. And we want, you you want to make sure you have the right entity structure. So those are three things you could do right now. Retirement contributions, material per, uh, equipment purchases and then setting up your entity structure. Yeah, I love it. I love it. And then as far as like spending that money Jim on equipment or on services like marketing or Or what promotional or stuff like that, you know, how do you look at it Jim? Do you look at it? Like, okay cool So this year we made let's say we did five hundred thousand in revenue. I'm a landscaper. I did five hundred K in revenue I know my task is gonna be maybe like around 40 50 K. For example, how do you look at it? Jim? Do you look at okay? I set maybe 50 60 K aside for uncle Sam and then I already paid off everything that you know, but teams paid off off there's a hundred K in profit there for myself do you look at it as like okay I'm gonna take fifty thousand of that hundred K pay it to myself and then the other fifty K you look at as an investment into the company or what's the right way to look at that you know to look at that that extra revenue that's left there So, okay, well, the revenue that's left, right, you don't pay taxes based on the money that's left in your bank account. That's one thing that gets people in trouble. It's like, I can't tell you how many times I've heard a contractor tell me, hey, my CPA called and they say I owe 25 grand in taxes and I don't have any money in the bank. I didn't make 25 grand. How in the world can I owe? you know, 25 grand of the IRS. Well, it's not what's in the bank. It's what your profit is on your profit and loss. So profit isn't cash in the bank. Profit is your operating expenses, your operating income, less your operating expenses. So whatever that net is. What I tell people to do is set aside a certain percentage of every dollar that comes in. Is it tough? Yeah, it's tough. Particularly when you're managing cash flow or trying to pay for materials or... You've got subcontractors to pay. We're all in that world where we're managing cash flow or cash flow. No, right? Cash flow slow. But if you take and you're pricing your services correctly, when a dollar comes in, if you're in the 20 % tax bracket and you you bring in a dollar, you're going to pay taxes, you know, depending on what your net profit is. your net profit is 25, 30%, okay, I've got a dollar. I know I'm going to have a profit on that of 25 cents. and I'm going to pay tax of 20 % on that 25 cents, then you better be setting aside, at the end of the day, five, six, seven percent of every dollar that comes in, just pushing it aside into a tax account, like every day, every night. So you might have an operating account, you may have a tax savings account in your bank, maybe you've got a payroll account if you've got a crew that you're running, you might have more than one business account, but every day you're moving money from the income account. or the operating account over to that tax savings account, that will at least help you have some money so that you're not gasping every quarter when a quarterly estimated payment is due, or certainly on April 15th when it's the big tax day. That's very true and I love that and then I don't know if most guys are gonna be able to do it You know daily gym put money aside. I mean, I'm sure they could but what's the most efficient way to do it? When you look at it every single month. Okay this month I made 80,000 in revenue. Let me put aside You know after after everything is paid off. There's 30k there. Let me set aside You know 10k is that how you look at it or how would you what's the right way to do? Yeah. mean, the percentage is very depending on the individual. they married? Do they file jointly married? Do they file single? You know, do recognize every dollar you make 20 % of it is already going to be deducted by something called a qualified business income or QBI deduction. So that's one nice thing about the way the tax rules run since, you know, the original Tax Reform Act in 2018 when Trump got in is there was a QBI deduction. So If you got 100 grand, only 80 of that's going to be subject to tax because you're going to get a credit for 20%. But yeah, at the end of every month is fine. If can't do it every night, do it every month. I remember my brother-in-law, who's one of the wisest guys, one of the most successful guys I know, he was in real estate, still is. Years ago, I'm talking 30 years ago, we were sitting there just... watching TV drink, he said, you know Jim, take taxes like it's religion. The IRS scares the hell out of me. And I said, what are you talking about? I wasn't in accounting at the time. I was doing something else. And he said, I take every paycheck, every time I get a commission on my real estate sales, I set money aside in that tax account. And he said, even if I don't have enough for groceries or my bureau allowance, I'm going to put money. And I thought, man, this guy's dead serious. And you know what? He's never had a tax problem. He's never fallen behind. He's never gotten to that point where he had to go back and make a payment plan with the IRS and then sweat because now he's paying back taxes and he's paying this year's taxes. It really takes discipline. You have to know how to price your services. Price it high enough so that you can not suffer April 15th. So I hope that helps. That's the goal to not suffer for every team. That is definitely the goal, Jim, for sure. And then Jim, Tons was literally more to about choosing the right entity. I know you mentioned that most guys are an LLC, like that's typical, right? If they're not, if they don't even have an LLC, that's, that's bad enough. You know, you don't get the liability protection, but most guys follow an LLC and then they operate like that for years. When is the right time, Jim, to swap to an escort? Is there anything I saw from an escort that you would recommend? Like how would you make that play to make it more efficient? Yeah, sure. And so just to help the listener here, um you set up an LLC that gave you legal protection, but it didn't do anything tax wise. If you're a single member LLC, great. You you feel more legit. You're an LLC and they told you to do that, but you're still subject not only to income tax, but also self-employment tax the same way as a sole proprietor. So If you get to answer your question directly, Manny, if you're getting now a net profit of 80 grand or more, you could go down to 60, but certainly by 80 grand, if your net is 80 grand, you're going to what? You're going to pay income tax on that money, and you're going to pay self-employment tax. What's self-employment tax? It's the Social Security and the Medicare that no one's withholding from your checks when a customer pays you. So money's coming in, no one's withholding tax, but at the end of the day, you're gonna pay income tax, you're gonna pay Medicare and Social Security or self-employment tax. That's 15%. What's 15 % of 80 grand? It's 12 grand. That's a lot of self-employment tax that you probably didn't even realize you're paying and this is why people are getting hit with such big bills in April and go, what the hell? did I, you know, if you're paying income tax on many plus another 15 % or 12 grand. So the opportunity for you as an LLC is you can elect to be taxed as an S corporation, meaning you're still an LLC down at the state, you know. Corporation Commission or the Secretary of State's office you're still in LLC always will be But on the federal side you elected your tax return to be an S corporation tax return Why because now you're no longer self-employed and if you're not self-employed, do you have to pay self-employment tax? This is not just logistics or words. This is a loophole in the tax law that's existed for over 50 years if you are a cell a S corporation You're now working as the shareholder employee of a separate legal entity. know, Manny might be doing business as landscape maverick. Okay. So Manny is now. employed by Landscape Maverick, he's no longer self-employed. It's a separate taxpayer, completely separate taxpayer. So that's where the beauty of it is. So now that $80,000, you split that in two. It's like a pie, picture a pie, $40,000 on one side, $40,000 on the other. Manny pays himself out of Landscape Maverick a $40,000 salary, and the remaining $40,000 that was his profit, he takes his distributions. The beauty of it is that 40,000 in distributions is not subject to the self-employment tax. So what's 15 % of 40 grand? That's six grand. That's half of the 12 grand you were gonna pay earlier as a single member LLC. Now you've saved that six grand. And we can probably frankly squeeze it up to about seven grand or 7,500 that you'll save just by filing as an S-corp. Is it worth it? Well, yeah, there's some cost. Now you have to file the second tax return. and you have to run payroll. So conservatively, that's going to run you $1,200 to maybe $2,000 a year. Let's say it's $2,000 a year in additional cost, but now you're saving $6,000, $7,000 against $2,000 in cost. You know, you're four to five grand ahead every year. You do that for the next 10 years. That's 40, 50 grand more in your pocket instead of sending it on to the IRS. I'm sure you can find a way to enjoy that money, put it into retirement, or take a vacation after the end of the busy season. So that's the strategy. That makes perfect sense Jim, that makes perfect sense. uh what do you say Jim to the people that think that, for example, there's a lot of people that would judge us as business owners, like all these guys are just taking tax breaks. These guys are taking all these tax breaks. I mean, in my opinion, from my point of view, like you would be dumb to not take these tax breaks that are so easy to take, but are we being bad people by taking the tax breaks Jim? What do you think? I had an accountant, a buddy here locally many years ago when I first got in the business, he said to me, render unto Caesar what is Caesar's, but not a fricking penny more. And so the tax code, know, lot of contractors, landscapers, pressure washers, HVAC, they don't know, you know, the tax code was written to, it's very much an advantage to be a business owner. And you don't have to be a billionaire. to take advantage of these tax strategies. Why do they set up the tax code this way? Contrary to what Bernie Sanders might say, right? They set up the tax code to incentivize people to start businesses, to hire others, to put capital to work, to buy equipment. This is what makes the economy run in a capitalistic economy. So all of these tax breaks about buying equipment and having an office in your home and being able to deduct your cell phone that you're using for business or being able to deduct vehicle costs because you're using your vehicle in part for business expense. These are built right into the tax code. You would be dumb not to take advantage of them. And so yeah, use every tax credit strategy, deduction, legal loophole available. Again, don't get so far out there that you're going to get in trouble with the IRS, but use every legit strategy. So if it's based in the tax code, if it's approved by tax courts, use it. or lose it? Would you rather send the money to the IRS or would you rather have the money in your pocket? It's really just business and common sense. Take advantage of whatever the tax code gives you. I'd rather keep that money in my pocket than give it to Uncle Sam. Don't get me wrong, I've got the flag right here. I believe in the US, big believer, but at the same time, we've got to take care of ourselves, take care of ourselves first. We can generate more so that when we hit that one, two, three, four, five million, we can pay more in taxes, right? Absolutely. Absolutely. Yes sir, yes sir. 100%. And then I know you mentioned a little bit Jim about the depreciation, bonus depreciation on equipment. Let's talk about that a little bit. I know you mentioned that guys are not depreciating 100 % of their assets. What does that mean in plain English? For the average listener, what does that mean in just simple English terms Jim? So historically, when you buy equipment, you have to ride it off over time. Why? Because you buy a skid steer, you might use that equipment five years or more, right? So the theory was you have to match the expensing of that equipment across the period of time that it's producing income for your business. a lot of vehicles is what the IRS considers to be five-year equipment. You buy a $70,000 truck. you're going to have to deduct it or depreciate it over five years. You buy a 30,000 skid steer. Typically, it's a seven-year piece of equipment. You have to ride it off over a seven-year period. That's what depreciation is. So the beauty of some of the more recent tax laws is that bonus depreciation, even up to 100%, is available. You could this year buy a $30,000 skid steer. put it into service by December 31st and deduct the whole $30,000 as an expense this year. So that's 100 % bonus depreciation. And a lot of people, a lot of contractors are familiar with 179 expensing where you could buy these SUVs or big pickup trucks, 6,000 pounds gross vehicle weight, and you could ride up to 25 grand of it off the first year. Well, right now it's 100 % bonus depreciation potentially. And this is part of the one big bill. that it kind of re-upped it because bonus depreciation was going away. It started going away in 2022. It was at 100%. It was going away like 20 % less every year. This year was gonna be, I think, 40 % depreciation. The one big bill makes it 100 % again. So buy a truck, ride off 70 grand. Buy a skid steer, ride off 30 grand. If it makes sense, right? This is again, So much on social media is clickbait or they want followers, they want likes, they're not even tax pros, they're not even licensed. But they're so-called financial experts and they're out there squacking about, start an LLC, ride off your truck, buy a Lexus, ride it off, whatever. Does it really make sense for the individual taxpayer? What if you're a landscaper in your second year of business? And so you haven't hit that point yet where you need to write off. 30,000 this year or you need to write off a $70,000 truck. Maybe that doesn't serve you. Maybe your revenue isn't there yet this year. Well, in that case, rather than write it all off this year, you want to space it out over the next five because your income is going to keep going up and up and up, right? Because you're a smart business runner and you run your projects, you get your projects done, you get your customers happy. They're making payments. referring new customers you're growing and going. Well, if your business is growing and going, you want to have some of these expenses still around in the kiddie, so to speak, that you can write them off in 26 and 27 and 28 when your income is continuing to go up. lots of great strategies. We just want to make sure it's suited to your specific situation. So that's why you want to just just don't take something someone says on a podcast or on TikTok and then you run with it. No. sit down with someone like myself to have a zoom call scheduled zoom call let's talk about it doesn't make sense for you and if it doesn't let's let's keep that so that you can take advantage of it next year so now i've given you kind of both sides but think it's really important that people kind of take a rational approach And let's go over an example gym of where it doesn't make sense right because some guys might be listening yeah, I'm gonna call my accountant right now. We're gonna start doing 100 % tax depreciation What's one example gym where it doesn't make sense to do it to do that? Well, if you're at a hundred or two hundred thousand dollars of income, top line, like you're just starting out, right? You got a couple hundred grand, you've got expenses. So now, know, you maybe you're maybe your take home is 80. I don't think riding off a seventy thousand dollar truck makes any sense. Your take home is 80. Your taxable income is going to be 60 because you've got that QBI deduction. I mean, does it really make sense to write it off? You're going to have a net loss. Why blow all that this year? So that would be a situation again, where you want to tailor your write-offs to what your income is. If you're anticipating making more money in year three, maybe next year and year four the following year, then why in year two of your business do you want to take uh a huge write-off that wastes some of it when you could save some for later? And what does that mean those gyms? that mean that they shouldn't like for example, let's say that they're gonna go out and buy a truck without 70,000 right? Should they not buy the truck? So that so they wait a year to buy the truck or should they buy a cheaper one or how would you how would you describe that? It may make sense to buy a used truck instead of a new $75,000 vehicle, maybe buy one for 35 or 40 that's used to get through the next couple of years. That's certainly one scenario. Mean I agree 100 % I mean we see it all the time too I always make videos about it, but I see guys that are hey You want to start up a new company they reach out to us through their marketing. I'm like, okay great. Let's let's let's go Let's get after it and then they're telling me oh, yeah, I just bought this new truck and We have this new skits here that's coming in next week and we spend a whole 140,000 They haven't made a single dollar in revenue gem. They haven't made that much money. They're buying all this equipment It's like starting backwards in my opinion, you know, I'd rather saw a used truck use the equipment and then get profitable and then go buy it and then know use a depreciation is that how you see it as well Jim. Yeah, mean, absolutely. You want to be running your business lean and mean to start. You just because you went into business and a skid steer is an investment doesn't mean you should go out and buy one. You have to really be in a place where you're saying to yourself, what is my projected cash flow next year? You know, would it be smarter for me to rent a skid steer for a while or buy a used one as opposed to going out and getting a new one? I'll never forget, I had a client about three years ago and this client was all in on getting 100 % depreciation and the client didn't really talk to me about it, just ran out and did it. What was the, here was the ticking time bomb. Bought a $80,000 F-150 and put like three grand down. So now, you know, big payments every month. When you buy a piece of equipment or a truck and you ride it off, the IRS is assuming you're going to keep that in use for the next five years or seven years. Instead, the client came back to me the next year and said, hey, I need to sell the F-150. I can't afford the payments. Is there any downside to this? I said, yeah, there's a big downside. The write-off you took last year is going to be recaptured this year as income. because the IRS has something called depreciation recapture. So, you know, just going out, buying a truck, riding it off. No, where are we going here? What's the long, everything, you need to be intentional about what you're doing. Again, another advertisement for sitting down with someone like me who maybe can see around the corners and say, hey, this doesn't make sense for you. Yeah, it's a great strategy. Yeah, you'd save lots in taxes, but. Money-wise, it's not wise. So just know, you're buying equipment. You're going to be locked into that piece of equipment for five to seven years. If you sell it and maybe take a gain or take a loss, boom, you're going to end up having, in addition to the gain or loss on your taxes, you're going to have depreciation recapture for getting out of it too soon. So there you go. Wow, wow, you're definitely right Jim. I I can't imagine making that mistake and then even though now in that example you gave the guy sold the truck but he still has to pay for the recuperation, that's a scary situation to be in man, that's insane. And Jim, let me ask you question Jim, know, big beautiful bill's out, you it's happening, you mentioned that the depreciation is definitely gonna be in there, what other things, what other parts of the big beautiful bill are positives for contractors that are listening in? What are some other things that they can take? advantage of with these new strategies that are being released by the current administration. lot of the big beautiful build honestly dealt with things that aren't centric to a business owner. You you hear tips, right? No tax on tips, no tax on social security, some of these things. So they're not really specific to business owners as much. uh do know if you're, you know, you're a contractor, maybe your spouse is a waitress and you know, getting paid heavily on tips. um That no tax on tips is only good up to the first 150 grand that you make jointly. So there's actually some income levels where if you exceed a certain level of income, the no tax on tips is gonna be tax on tips or the no tax on Social Security is gonna be tax on Social Security because you um can make too much. You can actually clear that bar. So there's certain thresholds if you make too much money. You're still going to see some tax on some of it. just throw that in there for people, word to the wise. Yeah, I didn't know that actually so even if you're married filing together and you make 150k or let's say you do 200k in tips or 200k in total I guess 150 of that is the other 50 you're paying for that. What I'm saying is if you have a business, if you have a business, make it 100 grand on your business and your spouse makes another 70 grand in tips or 70 grand a combination of tips and income, between the two of you, all of that income gets thrown in the bucket. And if your adjusted gross is over 150, yeah, then the no tax on tips can get, can start to. phase out is the best. There's an income phase out. There's an income phase out on a lot of stuff. A lot of people send kids to college or expecting big college credits. Very, as over 150, all those college credits go to waste. So the no tax on tips, the no tax on social security can be a similar situation. You can actually phase out of these benefits because you make too much income, which is another reason you should sit down with a tax pro and plan, okay, how do I make it so that my adjusted gross isn't over 150? What can we do to get this below it so that I can also get a college credit or the no tax on tips? So there's a lot of moving targets you gotta be looking at. That's amazing. That's amazing. And then one more quick question too, Jemon, on the previous topic too, which was under the appreciation, like is there, you know... Is there, you mentioned things like skid steers, trucks. What else, what else can be, if the listener is in a position to take advantage of it and make sense for them, what else can they purchase, Jim? What else can they purchase? Because there's a lot of young guys that are listening to them, 23, 24, 25 year olds that are just pushing, pushing, pushing. They're paying themselves, but they're reinvesting a lot. What else can they purchase to take even more advantage of these things? Of these write-off. two answers to that. One is there's other equipment that doesn't come in the form of a truck and trailer or a skid steer, right? An office copier, a desk for your office. mean, you know, these might be a few hundred dollars, but they can be written off immediately. And if you need it and you've got the cash, buy it before the end of the year. So it's a deduction on your 25 return. uh Here's some other examples that don't have anything to do with equipment. What if you're in an office or an office park where you're paying rent to store your equipment? uh Okay, why not pay January's rent in December? get the deduction on 2025. So you want to accelerate into 2025, any expenses that you might be paying on a regular basis, rent, software expenses, dues and memberships, this sort of thing, insurance. You could prepay January expenses in December of this year and bring that into this year as a deduction. On the other hand, you may want to defer or push back some of the income. Like I know contractors who just don't send out invoices in December. They're like, okay, why should I get this income here in December? If I can do without it, it won't be a part of this year's taxable income. So I'll just send out invoices January 1st and then all those people go, yeah, I didn't pay for my November cutting or yeah, I didn't pay for my December mulching or whatever. uh That's a good strategy, yeah. And how much can they get away with, Jim? How much can you? You're pushing back your income until next year by not sending out invoices and you're pulling forward your expenses into this year. So you want to accelerate your expenses to for your income. So that's another thing. Yeah, that's a great point. But how much, how much can you get away with there, you know? Can you prepay your marketing for all of 2026? Can you prepay your payments? You know, is that legal? Is that, is that illegal or? Absolutely it's legal and honestly a good business move for you, right, is okay, you're a marketing agency. Offer a prepaid discount to your clients for the first quarter of next year. Or if you're a landscaper, offer a prepaid discount. If you want to get money in, you know, if you want to get money in because you need the cash flow, offer a discount. Okay, hey, your January, February, March, your spring seeding, your early season cutting, your fertilizing, we'll do all of that, you know, January, February, March, but prepay us now for a discount. there's certainly, yeah, I mean, you could accelerate some income if you need some cash flow, but that would be an expense to your customers. That would be an expense to your commercial customers, so they'd get the deduction this year, you'd get the income this year. It's a win-win. That's win-win-win everywhere. Yeah, so things like, okay, if you have a lawnrower where you're charging monthly for maintenance or lawn care, you can prepay the first quarter. oh If you have homeowners that you're doing projects for in December, maybe you send that invoice out in January to push it forward. you said, wow, these are some great strategies. These are golden nuggets, Jim, and these are huge. You may also want to pay your accountant early. I mean, any services, bookkeeping services, tax preparation, tax strategy, if you're paying someone to do that on a monthly basis and you want to get the deductions this year, I'm sure your accountant would not mind. Give you a discount, perhaps. Man, you got me thinking, Jim. Maybe I should write off my haircuts. Maybe I should write off the laundry. Maybe I should... Well, I guess some of these things we can't write off. I guess some of these we can't write off. But these are some great ideas. off your country, can't write off laundry, I've got a lot of real estate agents they want to write off their nails or their wardrobe. No, that's those aren't business expenses. There's a large personal expense to that, I digress. expenses gotcha gotcha let me ask you Jim one last question here So a lot of guys listening in you know young guys some of them. You little older as well A lot of us know that real estate is probably gonna be your end play I even know some some some of our clients that are like hey, I'm making money from landscaping I'm gonna take that money reinvested into real estate For the four R guys at our self-employed gym, some of them might be LLCs, some of them might be taxes S-corps, how can they start the transition to be able to buy a home? Can you buy a home if you're still in LLC, you don't have any pay stubs, of course you're the owner, you're paying yourselves distributions, but how do we make that play, how do we transition that smoothly? What's the game plan there? So if you are a sole proprietor or a single member LLC and you're taking distributions or draws out of your business, you still qualify for a mortgage based on the net income for the business, not the draws, not the distributions. What's the net income for the business? And if you're an S-Corp, what's the net income on the S-Corp plus your W-2 from the S-Corp? So that all qualifies towards a mortgage. So yeah, don't worry if you're making money. Right? You can qualify for a mortgage based on just being a Schedule C sole proprietor or a single member LLC or an S-Corp. Regardless, that all qualifies towards your mortgage. um So if you're young, you need a first time home as your primary residence, yeah, know, your net income from your business is going to qualify you for that. Later on, where I thought you were going is you also should begin to think about what kind of investment properties or short-term rentals can I buy? Because those short-term rentals that are A, B, and B or whatever, those can be great write-offs for you. you, like I'm saying, you're setting aside money for taxes, what if you're also setting aside money for your own wealth building? Well, you can put that into rental properties and then write that rental property income off against your landscape contracting income and that is another tax strategy. Yeah, it's beautiful. And I think you can also cost several great those short term properties, right? It's not like a regular, you know, home where you're living in. You cannot depreciate that a little bit faster. Is that, that correct, Jim? Well, yeah, you can cost segregate on rental properties. Absolutely. The building itself is going to be believe it or not, 27 and a half years. So it's a long time. But the other stuff that's in the rental property flooring, appliances. uh Those could be examples of things you could depreciate over five or seven years or ten years as opposed to depreciating over the 27 years of the building. And landscape improvements can be depreciated as well, right? So hardscaping, driveways, uh fences and decks, pools, pool surfaces, and all the landscape design of the actual landscaping itself, the soft stuff, that can all be depreciated. That's amazing. I freaking love it. I freaking love it, Jim. And you've added a lot of value to the listeners, the audience. Jim, you know what? Let me ask you this. How can landscapers, how can these listeners here, landscapers, service contractors, whoever's listening to us right now, how can they get in contact with you? Because they've made some of these mistakes. Some of them don't know if they should keep an LLC or whatever you tax that say as an escort this year. They might have question on cost segregation, bonus depreciation. How can they get in contact with you? How can they reach you? What's the next step for that, Jim? Tell us more about that. you So my company name is Anchor Accounting and Tax and my website Probably Manny would not have recommended this name, but my website is anchoraccountingandtax.com. So if you go to anchoraccountingandtax.com, there's a contact page there, just click it. You can send me a message through the contact form and I'll be back in touch with you like the next morning. And we could set up a phone call, it could be like a 15 minute discovery call just to get acquainted, talk about the services we offer and whether or not you feel that's a good match for where you want to go with your business. Yeah, that's absolutely beautiful. So guys if you guys are interested in working with an accountant Tax, that is just reach out to Jim I'm gonna have his contact details below this this description and like I said guys Jim is my account to he is my tax. Radishes. I trust him We're doing some really cool plays swapping over to an escort looking through all the books major Everything is ready to go to ending here oh On a good step so so definitely reach out to Jim guys and Jim is there any closing thoughts here Jim anything you want to say to the audience before we take off here you Well, I think, you know, I think a lot of times... Contractors, any business owner is just again overwhelmed. They feel out of control when it comes to their bookkeeping or to their taxes. So what do do to get control of it? What do you do to get clarity? um Don't feel intimidated about reaching out to someone like myself. uh And I, you know, personally, I work with contractors like big time. This is what I've been doing for 25 years. So uh I'm very comfortable. I understand where you live, what you do, how you think. um Don't feel like you've got to have a lot of money to get someone who can help you make sense of your money, grow your business, and stop overpaying the IRS. um And a lot of people initially when they see me online, less so now, particularly among 25, 30 year olds, but it's like, well, where are you located? Well, okay, I'm physically in Virginia, but you know what? It doesn't matter. Where are you? You're on your phone, you're on your computer. The IRS isn't in your... You don't have to have a bookkeeper or a tax pro in your local town. You just need someone who understands contractors. You need someone who knows your business that you can relate to, that you feel doesn't come at you with a bunch of accounting jargon or tax speak. uh You want access. You want advice, you want to know they'll return your phone call or your email. You want to know you can have a conversation that's plain English. And you want to know that they're in your best interest to help you reduce taxes, not just fill out a tax form and then call you and tell you what you owe and then have a great day. um If that's you, I'm here. So you can reach out to me and we can have a conversation by Zoom or by phone or both. And let's just see if it's a good fit. Absolutely guys. Yeah, definitely guys reach out to Jim. I mean like I said, he's my accountant. He's my strategist Experience has been great so far. I mean we're getting on calls and Jim I told Jim from the day that I saw as a Jim I'm gonna call you a lot Jim. I'm gonna call it I'm gonna email my ass questions. Jim you can expect the same thing out of our listeners a lot of our guys are young They want to put in the work their hustlers And I'm super happy that we connected to him. We're doing some stuff together. We're educating the audience now. This has been amazing Jim I really appreciate your time Jim. I'll have the guys reach out to you if you're contacting us below But Jim, thank you so much for joining us at the Contract the Millionaire podcast. Hope you guys enjoyed this episode. Make sure you like, share, subscribe, and I'll catch you guys in the next one. Take care.