Part III of My Conversation on HVAC Ladder

Because we work with our clients year round, we deal with all the communications from the various federal and state and local agencies. So, they could work on their business, make their money and we handle the client side and the planning side.

Okay. Now, when you do that for your clients do you … is it under kind of like retainer, like you would retain an attorney for services? Or is it … how do you handle that?

After we do a tax plan in order to be a client of ours you have to go through and have a tax plan first.

And a tax plan is typically going save somebody somewhere between $10,000and $20,000  a year.


That’s the  goal to make it worthwhile. And then at that point if they want to work with us going forward, they can work with us going forward. Everybody’s on a monthly retainer and we work with them throughout the year.

And do you take a … I mean, so you do the tax plan and kind of show them the money that they’re wasting, sending to the government, potentially, and then go from there … whether it makes sense for them to engage you to save, you know …

Correct. we do a tax plan to show them exactly how to save it, and then implement with them and then about a third of those clients say they want to work with us going forward. The others they could take that plan back to their current CPA and work with them.

Okay. Interesting.

Yeah. It’s a … you know, typically, the client has got somewhere between a 400% and 600% first year ROI, so it’s normally … it’s a good deal for them.

Oh, yeah. Yeah. So, I think most of my audience … there are some that have larger businesses that are offices that are operating from an office or from a shop. But I think, for the most part, the majority are working from a home office. So, in those cases, I think that’s probably a huge take-away. And certainly for me, because I run my own business and I work from home, but I’ve never claimed the home office credit because I always thought it was, you know, a red flag for auditing.

What do I need to do, in this specific case, to claim a home office … what do I need to do, and I think this is also something we talked about before I hit record, to have a defensible position … I think, is how you put it … for the IRS? So if they come asking questions, what type of documents do I need? Let’s say I’m using the spare bedroom or a certain space for my home office at home.

Well, the space has to be solely for your home office. So, it can’t be the spare bedroom that, you know, people are using.

Oh, okay.

It has to be specifically for your home office … used exclusively.


So, there’s a lot of space in the house where people can do that, whether it’s a section of their basement, it’s a spare room. It could be the garage, you know, that they just use for their office. And we tell clients, you know, take pictures, alright?

Take pictures.  And keep good records.

Right, so-

And then, let’s just say that space takes up five percent of your square footage of your home. So, now you get to write-off five percent of your home expenses.

So, that’s utilities, that’s … everything.

That’s real estate taxes, mortgage interest, and then we say, well, I’m already deducting my real estate taxes, I’m already deducting my mortgage interest, but that’s the way it works. So, you get to take that there. If you’re subject to AMT, it helps a little bit there, but you have to do it the right way …

Mm-hmm (affirmative)-

And document what you’re doing and what you did.

Okay. So, in my case, right now I’m working mostly from a spare bedroom, but I have an unfinished basement that I could, take a portion of and make it into an office. But, let’s say … I mean, my basement is roughly a third of the square footage of my house. It’s a two-story home with a full, unfinished basement. But, let’s say we’re 25%. Let’s say I finished most of my basement and used it as an office and it became 25%. Is there a certain percentage of the square footage of your home that they’re looking at to …

No, but if you actually take your basement and then you finish it to create an office …

Mm-hmm (affirmative)-

You know, you document all that.


Because most people aren’t going spend what it’s going to cost them to finish half of their basement to get a home office deduction.


You know, so if you’re doing it, you’re doing it because you actually need the space.

Okay. And would it … I mean, so you’re saying it may not make sense to do it?

Well, from a financial  Perspective it’s  like, you don’t buy a piece of equipment just to buy a piece of equipment to get a deduction. You buy it because you need it, because I’d rather  have the money in my pocket or give a percentage of that money to the government?


You know, I’d rather have it in my pocket. So, you don’t want to create extra expenses. You just want to … if you need the space, then you build it out. But, if you don’t need all that space, why would you spend the money to build all that out?

Right. Well, I guess right now I’m working from a spare bedroom.

Right. I mean, but what I’m saying is, you don’t have to do half of your basement.

That’s true.

You could do 200 square foot-


Or something like, which is, you know … gives you more room … you know, stuff like that.

Exactly. So, you don’t want to just spend money to get a tax deduction. You want to keep … you know, the whole idea is keeping more of what you make and if you’re laying it out just to get a tax deduction, that’s not a good strategy.

Right. Sounds good.Get your copy of my book the 10 Biggest Tax Mistakes That Cost Business Owners Thousands HERE!

Listen to the full episode here.

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