The Contractors Secret Weapon and Dave Negri

Welcome to another edition of the “Contractors Secret Weapon” weekly podcast with Dave Negri. This program is dedicated to helping Contractors, Remodelers, Painters Roofers, Roof Cleaners, and Business Owners in the construction industry gain an unfair advantage over the competition. This program supplies you with information that the competition doesn’t even know exists.

And today I have a returning guest. His name is Craig Cody, and Craig is a Certified Tax Coach, Certified Public Accountant, business owner, and former police officer. He has seventeen years experience on the force in addition to being a Certified Public Accountant for the past 15 years. He’s also a Certified Tax Coach, and as a Certified Tax Coach Craig belongs to a select group of tax practitioners throughout the country who undergo extensive training and continued education on various tax planning techniques and strategies to become as well as remained certified. With this organization, Craig has co-authored an Amazon best seller book “Secrets of a Tax Free Life”. And today I’m excited, because this is one that you’re all going to love. The topic is, “Can I write that off?” So Craig thanks so much for being with us today.

Thank you very much for having me today, I’m psyched.

And we got such a great response to you being on here the last time that this is really–I know it’s going to be fun. That’s always fun for me but it’d be fun for a lot of our guests, too, so can I write that off? Boy that is probably a thousand different things. There are thousands of different questions we could ask.

I don’t know if I’ve ever been asked that question before. First, you have to get everything out of your shoe box and put it in order before I can tell you whether you can write that off. Right?

That’s right.

I wanted to ask you, what is the most unique thing that someone has asked you “Can I write that off”?

It was probably some type of cosmetic surgery and I’ll leave it at that–leave it to the imagination.

Okay.

Okay, actually it was work induced, which was even strange and not boring.

I’m sure it’s not So, I’m sure that–and I know that a lot of people are–it’s getting that time of the year and you know, as they go through all their income expenses and stuff and they’ve gone, “I’m sure that I can write that off “, or “I wish I could write that off”, what are some of the things that you want to tell us about that today?

So one of the other fun things, a lot of business owners come up to you and say, “Give us a list”. Yes, some of them that they can’t write off, but there’s a lot of times they’ll come up with medical expense items and ask, “Can I write this off?” Well, you can write it off but you’re not going to get the benefit of it unless we do it a certain way.

Another thing that’s actually interesting is if your child goes to a special school and maybe they have ADHD, or ADT, or there’s some reason that they have to go to a special school, that can actually be a legitimate medical deduction and we could create a medical expense reimbursement plan. So that can work well. We just had a client that had to pay huge fees for a rehab that they thought they were going to write off through Schedule A and use $30,000 of the deduction. So we were able to show them how to do it the right way and take the $100,000 deduction. So you need to ask, if that’s really what it comes down to, is you should ask. And you should have somebody that’s willing to look into things and not just shut their mind out, and is willing to invest in education and learning what’s out there that you can do because there’s so many things out there. So many things, and that’s why, when we work with clients, sometimes they’re shocked, “But wait, I can write my pool”? Yeah you can. That’s why it’s so important to have someone like yourself as a member of the team, because you are a team member, right?

Everybody should have a team. We spend so much time working on our businesses, building our businesses you know can’t do it alone. You need to concentrate on what you’re really good at and have other people deal with the stuff that you’re not really good at.

Yeah that’s the main thing. So, what I’m going to have, a kind of friend who has a multimillion dollar business. I’m going to think about some of the things that actually had, so if you have a boat you could–potentially you could write that off for some time. But, will you advise it?

You really have to be careful on that. But typically, if somebody buys a boat and it can actually be a second home and they can write interest–they could write the interest off on their own Schedule A.

So, there are rules with that that a lot of people watch you fall on this subject. That could be a good thing. You know there’s a million-dollar limit on mortgage interest and stuff like that but they might that might change in the next 24 hours might become a lower number. (The new limit is 750,000)

I figured they might go higher.

I don’t think so. I mean I think that tax money–looks like big business is really going to get a big bulk of whatever this tax savings going to be.

Well that’s a whole another story for a whole other day where that comes from.

Yes eventually.

So let’s keep moving on. What can I write off stuff that most people don’t even think about?

Most business owners?

Yes.

I mean they people don’t think about their home office. They definitely don’t think about that. Some people do, but most people don’t. They don’t think about their medical expenses. They don’t think about how to properly do that. They don’t think about how to write off their kids Camp, High school tuition, Hockey, hockey lessons, or hockey camp and stuff like that. So there’s a way to do that by hiring your kids and then you pay them directly and then you let them pay for the camp or the school directly out of their bank account. Where you can hire them and make them pay for their own stuff, and he goes yeah the last time I talked to my accountant about that he said there’s no benefit to it. I said, “Fire him.”

Right, exactly get somebody that thinks properly. Right, exactly. That’s very true because if he’s a realtor and he’s a Schedule C that’s a home run.

Yes, I said there’s stuff that they can do for your business that you can pay them and let them start paying their own bills.

Exactly, you make non-deductible expenses deductible. I spend a lot of time going to advance trainings and learn this stuff. So the typical CPA has to do about 30 to 40 hours a year in training. I do easily two weeks if not more.

Right. Because now you’re learning the ins and outs of what can and can’t be done and well, but you would think that everyone would go for that but there again that’s why we have different personalities. We have different thought processes and different things. I just need to find the right person who works with you.

Exactly, it’s kind of like working on versus in your business.

Yeah, yeah

So we have hiring the kids, we have a home office, we have your car and truck expenses and if you have a home office now and you travel from one office to your other office becomes deductible.

So let’s just say, in my case, I spend easily two hours every morning answering emails and doing stuff, plus easily two hours then time on the weekends. As long as you spend fourteen hours a week working from that home office then it falls under the rules and it’s qualified. And most people I speak to, when I tell you got to do 14 hours, they look at me like 14 hours? I’m working 60 hours or 40 hours in my regular office and I’m home and doing emails, I’m doing billing, I’m doing this. That’s a drop in the bucket.

So yeah that’s a huge thing because I was there again. Not that I have two offices but I was always kind of under the impression you could only do one.

No, well think about if you’re a real estate company. You have multiple offices. Why can’t you–you ought to deduct the rent on all those offices and all the expenses that associated. Same principle with dental practices. And we all do a lot of administrative stuff when we’re sitting at home, whether it’s in our office or at the TV, which means you’re not working in your office so you should be doing it in your office–in front of the TV in your office—

Right, exactly. So that’s a bunch of things that you can do. Then we have the “you’re allowed to rent your home out 14 days a year and not pay income tax on that money, so that’s an interesting thing.

Interesting, so you rent it out to your company for like a Christmas party, or a New Year’s party, or any other kind of party during the year?

You can do that, or you could rent it, especially with Airbnb that’s really popular, but you want to make sure you don’t go off the 14 days because if you go over the 14 days it’s all tax taxable.

So is it 14 days total? Or is it total—

Okay, so it’s 14 days total through the year. That has just brought up for where I live. Every once in a while, you have a super bowl that comes here. You could rent out your house for the weekend for megabucks.

Yes and you don’t have to pay that. You know, I had a client that used to rent a house in Brooklyn for movies and they used to pay me. It was wonderful; they were paying a $5,000 a day, so conceivably if she was able to get them to rent it for 14 days she would’ve made a lot of money.

Yeah, right, and she would not have had to claim any of it legally on a tax return. I love that.

And you just got to be careful that you don’t go over the 14 days. So, you need two guys who everyone is listening as you need to think about how you can do that in different venues.

You know, if you can’t rent it out, rent it out for your party you have, an associate renting out for a little party. I don’t know it doesn’t matter; just figure out how you can get the 14 days in there because it could it could be worth it to you.

Exactly exactly.

But, yes there’s some interesting stuff out there and I think what everybody needs to do, is they need to communicate with their CPA and stay in touch with them and make sure that they stay in touch with them each other so they could all help each other keep more of what they’re making.

Yeah, exactly.

Yes that’s the key. I always say that’s where the profit that you never see is, when you pay to the IRS. So let’s get to keep more of it.

Exactly. That’s the, probably, the easiest profit to make rather than going out and getting more clients, you know they get more of it.

Yeah. Yeah because you were thinking about paying less and now you get to keep it.

That would be nice if we keep it all but that’s not going to happen. But, right, as much as that’s legally allowed so that we can have more fun and do whatever we want with it.

Yes, there was one of the Supreme Court justices that have a very quote that says there’s nothing wrong with structuring your affairs so you pay the least amount of tax possible.

Who was that guy? OK I have to–because I knew it. I want to–it wasn’t Holmes was it?

No, I’m thinking it might have been Marshall but I’m not exactly sure. I remember that. Yes, I remember that– reading a bunch of stuff. It’s my responsibility; it’s my job, to pay as little as possible because it’s written in the tax code so that I can. I just have to be able to know where it is and what it is. And that’s why; again, we’re going to talk to people like Craig so that we can do that.

Exactly, and it’s actually William Rehnquist. There’s nothing wrong with a strategy to avoid the payment of taxes. The Internal Revenue Code doesn’t prevent that. That’s a statement from justice.

Okay what’s another really weird thing that someone’s asked you if they could write off if it was available?

Cosmetic dentistry. Somebody having had to get new, well guess you want to call them false teeth implants and first time I heard it, I was like can’t be deductible. I go back to my grandparents, and with the old dentist and it is you could actually write it off as legitimate medical expense.

While I would think it would apply to certain industries. But what the heck. You know like you were a news anchor or actor or something like that, then it would be part of your income producing.

Right, but if I don’t have if I don’t have teeth I can’t chew food so I can’t eat so I can’t survive. So sometimes just the matter of the way you document different things but I think that one’s a pretty straightforward one. The first time I heard it, I was a little surprised. I’ve gotten some weird ones over the times and my dog; obviously you can’t deduct the cost of your dog.

Now if you have a Rottweiler and it’s in a junkyard, yes, that’s a different story.

Yes. If they have to go to a special school that–those are typically pretty expensive things and they could save you a lot of money.

Yes, especially some schools. I mean yeah, I can imagine. I mean some schools are expensive, as expensive as college.

Some of them are more expensive, I think depending on what the school is for to be very expensive. Same with rehab–can be very expensive. Then ability to structure your affair so you can actually write that off is a good thing.

Yeah, wow that’s amazing. Just, again–that’s just knowing the right people who know the right things that will put your whole tax perspective into profit and turn it into profit making mode.

And I guess I could throw a little thing in it, that’s really more towards contractors and rehabbers and stuff like that is domestic production activities deduction. (This was repealed with the recent tax legislation)

What’s that?

It’s basically a deduction that was meant to keep jobs in the US versus going overseas and giving these factories that say okay a credit or a deduction for juicing goods in the United States. I guess as the bill was written, it was expanded to include construction and remodelers and stuff like that and basically if you take that they called Qualified productions activity income and you take then your qualified activities expenses and you get your net income. And you take 9% of that, you get a deduction on your personal returns. So if let’s just say you’re a new home builder or you do spec and you know you have $500,000 in net profit. You can wind up with a $45,000 deduction for this. It’s very often missed

Wow, yeah, you know that’s why it pays to go to conferences and learn things and socialize. Talk to other people that are doing different things. People love to share ideas, more than your average CPA because you’ve taken the time to become the expert. Just like we tell you, our contractors have become the expert, take that extra time to become, you know the certification or become the expert learning more from an expert in their field so that they become–now they become the go to guy, like you become the go to guy to contractors. They’ve become the go to guy to their clients.

Yes, exactly. Exactly, so it’s like, it’s a consistency in the whole growing your business standpoint.

Yes. I think that kind out of odd type of questions. That’s your standard questions that they asked us. So what’s the funniest one that you’ve ever got?

It was just flat out and now she was, somehow, she called the office and she was a lady of the evening. And she had questions about what she was able to dock or what she wasn’t able to dock.

Of course they asked her, are you incorporated? And you know the interesting thing is, even if you’re performing an illegal activity is supposed to pay tax on it.

Yes I know. I know. Yeah that’s the funny thing. Well, I mean, that’s why they’re trying to make it a cashless society so they can track all the money, so they can tax everything.

Right exactly. Exactly. I don’t know–I’m not sure what Bitcoin fits into all that, and crypto currency but we’ll see. But that’s me. So, hey Craig, you know this is really awesome. I’m just–can we can I write that off? That’s been a lot of fun today. How can our Listeners get in touch with you so they can get more of your information and actually contact you personally if they want you to help, or consider you being on their team?

Sure, they can go to our website. It’s CraigCodyandcompany.com, and actually, if they go to www.CraigCodyandcompany.com/secretweapon they can get a free copy—paper copy–of our book. Our most recent book, “The 10 Most Expensive Tax Mistakes that Cost Business Owners Thousands”. They could also call at 516-69-4051 or email craig@ccodycpa.com. And I am sure you will have all that information in your show notes.

Yes we will make sure everything goes was on our show notes so everyone can go to and download and get whatever information they need. Excuse me I’m losing my voice here. Awesome. So that’s has really been fun. I’m glad that you are all our guests today and we got talking and I’m glad that you are going to be at the podcast.

Yes. That sounds like a fun thing.