Health Insurance and Retirement
The other thing that I think we need to talk about in the survival guide is this concept of health insurance, particularly now you've heard me make some offhand remarks about healthcare dot gov, and we're going to talk about that in a minute, but we need to think about getting some health insurance because if we flip this back over and I haven't erased this for a reason we've got medical on here, right? Medical or health care insurance remember that if we go into business is a photographer and we're not prepared to deal with our health needs, obviously, we can't continue to work and that's a big component of it businesses that have fifty orm or full time employees, which doesn't include most creatives we're now gonna have finds if we don't provide full time health insurance that meet certain federal standards to our employees, smaller companies, which would include most creative cos we don't have to do that. We have there are some notice requirements now, ladies and gentlemen, if you'r...
e employing, um employees is a creative business, you need to be familiar with the notice requirements. I think the notice deadline has passed for the affordable care notice to go out, but if you haven't sent that out, you might speak with your accountant or sepa attorney about that, and there still might be time to get that out. The law requires large and small companies to inform their employers employees in riding of their rights under the affordable care act so it's part of this concept of the shared responsibility provisions on dh this is what it means if you don't have insurance by january thirty first or obtain an exemption, you're gonna get charged a fee for every month you don't have insurance on your year in taxable income, so for those tuned into creative live, if you've heard this chitter chitter chatter about obama care and who's for it who's against it uh and you don't know what it means for you, you need to do some research on it right now because it's gonna affect everybody um, form or info, go to irs dot gov and search shared responsibility provisions, and that will help you learn more about how this obama care affordable care act is going to affect you because it's it's going to cost you money if you don't comply uh, again, goto irish stock of in search shared responsibility provisions there are some exceptions to this individual mandate that you have this equivalent insurance coverage if you have insurance through an employer already, you don't have to do anything different if that employer plan meets the federal guidelines and there's some hardship provisions, et cetera, if you're covered by medicare medicaid, you don't have to go out and get new insurance now remember, if you work with an employer uh, if you work for an employer with less than twenty five employees, you have to get this insurance or pay the penalty, and your kids are subject to the penalty too. So if you have children and you don't have insurance, um, you're you're going to find that you're going to have to pay this penalty. Who do you pay it too? The I r s it's a tax penalty that's the way they designed it. So if you don't have this coverage, you pay it. Tio uh, the irs at the end of the year, the maximum amount is it's difficult to figure out? Some say it's small some say it's large. What we know is what the cap is. The cap is according to the congressional budget office, it's going to be the penalty is what's going to be forty, five hundred five thousand for individuals and twelve to twenty five for families and then it's a percentage backed off of that. So it can be kind of, um, kind of scary. If you treat yourself as an employee, you get credits if you go out and buy it. So businesses with fewer than twenty five employees with average annual annual wages of les and fifty are eligible for temporary tax credits and the credits increase going forward, so if you treat yourself his employees, you can deduct the cost of your insurance plus get a fifty percent tax credit. Ding ning, ning ning ning, ning ning tax credit is where you owe taxes and they give you a credit towards those taxes. It's better than a deduction, it's like a deduction on super steroids, it's where you owe one hundred dollars in taxes and they give you one hundred dollars tax credit and it cancels it out so there can be some advantages too small employers that actually go out and buy the coverage so you might want to check that out if you think that this will, this is going to apply to your photography business, so you know you probably want to buy some health insurance if you don't have it or you're gonna potentially pay up to a five thousand dollar tax penalty to the irs. It's not guaranteed to be five thousand it depends on your individual income levels, etcetera, but if you've got to make another five grand every year for health insurance premiums, do you think you can, uh, afford to pay all of your costs of your business? I said, we're going to increase your bottom line expenses by a five, five grand next year I mean, we got to start planning for that. This needs to be factored into our business plans that we talked about at the beginning of the course. We have to start thinking about this affordable care act. Does it make sense to give away your photographs for basically free? If, if you're gonna have to pay another up to five grand for health insurance? I mean, think about that. How much more important is it to know your true hourly cost to cover your bottom line? I mean, this just gets us thinking about the serious decisions that were making getting into, um, getting into this let's talk about the auto deduction because everybody needs to drive, right? I'm gonna tell you how to do that, right? We're gonna we're gonna finish strong. There we g o one more forward, forward, forward, forward, forward. Thank you. Going. I want to go the other way. It's coming. So we've got business use of otto what's. That mean we're gonna deduct some things? Keep going right there. We've got the ability to write off certain equipment under section one seventy nine of the tax code in year one. That means we don't have to depreciate these assets out over three years or five years, which normally a computer's three year asset, I think maybe a five but it allows us to write that off against our income in your one and we use section one seventy nine of the tax code to do it now the section one seventy nine limit for all business property in two thousand thirteen is half a mil your purchase limit is two mil but you get this bonus depreciation depreciations the concept of we take the value of an asset we say look this thing's gonna wear out over time so what do we do? We let you expense this asset that you've bought in these various tax years so double declining balanced appreciation is one way to do it where you take it in you you divided across the number of years three years or five years and you get to take twice as much in your one and then twice as much is whatever's left over and you're too and so forth but here if we go out and we buy a car let's make it not a big car let's say we just go buy a ford taurus we're not going to get to deduct hardly anything on that taurus we might get to deduct the standard mileage rate but we're not going to get any kind of a true deduction against our actual income if we buy a little car so what we can d'oh is in this tax year if we go by a big fat hummer humvee uh pick up truck large vehicle that has a combined vehicle weight rating of six thousand pounds or more. The government will let me take a twenty five thousand dollars section one seventy nine deduction in this tax year. That means if I had twenty five thousand photo income and I get the full twenty five thousand dollar deduction, I've had to buy a hummer to make that happen. I don't know any taxes. This is your government, folks, our government. I didn't pick the law. This is just what it is. So in addition, if it cost more than twenty five grand, he still get to take the bonus depreciation. Plus, you get to take your standard appreciation. So that's. Fantastic. Let's. Look at how it looks let's. Say that in this year I bought six hundred fifty grand worth of stuff. I could ride off five hundred grand of it. You get this fifty percent bonus. First year depreciation is seventy five. Plus my normal first year, my tax savings on spin and six fifty saved me almost a quarter of a million dollars under the section one, seventy nine deduction scheme. Um, and at a forty two percent corporate tax rate that be over almost six hundred thousand bucks, um here's an example of by and uh I mean this is kind of a nice uh let's say it was my I used my diesel pickup truck about a dodge ram diesel which is more than six thousand pounds I was able to let's say it was thirty five grand the first year right off his eleven plus you get your normal first year depreciation and two double declining balance plus your first year deduction so get a tax savings of eight thousand six hundred and sixty seven dollars which means that truck after taxes on ly cost me twenty six thousand dollars that means the government paid the difference between thirty five and twenty six that's insane I love it so let's buy us a gas guzzling truck and show you how it works I get the big oil here sorry for all you seattle folks my buddy uh jeff jeff long he lives out here and he took me from my first seattle to her in his prius that was my first time in a prius but let's buy a big gas guzzling truck here we go um I guess we just did that we bought the truck didn't we look but we saved let's buy thirty five away that was for my I'm sorry I've lied to you. This slide was for a standard car that doesn't get the uh the uh one seventy nine deduction look what your tax savings is see that now let's buy the truck same amount of money it's thirteen so how much more did we get here is a standard cars your prius you get an eight thousand dollars to priest one seventy nine deduction depreciation deduction you buy the gas guzzler, you get another what? Five thousand bucks? So that's your costs after tax savings here's what your passenger car would cost you that's what your six thousand pound car would cost you because you don't get that one seventy nine deduction you're just left with thea you're just left on the car with your first year right off um plus your normal years depreciation so your accountant can help you with that don't get too lost in all of that but here's some qualifying new vehicles you could get a tahoe an escalade a suburban an expedition in the bonus material includes a complete wish list of all of your six thousand pound and greater cars that you can tell your accountant you're going to go by so that you can get the best tax savings possible. Um make sense yeah. Do you have to buy that vehicle outright cash or can't be financed? No you can finance yeah, you can definitely finance it. Yeah bob, if you already personally own one of these gusts guzzling things can you sell it to your company? Yes, but money has to actually change hands so you can't deduct what you haven't paid for so you actually have to pay your come your company you have to pay for it which would be okay but they need to have income coming back into you that you have to report because you've sold the truck you know what I mean because you've got incoming coming into you personally see they have personal income tax liability because you just sold a truck and got money so it be better to go get a new one so is the first year of business technically started the day that you register your business starts the day that you first intended to make money and they can come find that out about your life no you know what that day is you remember it don't you remember when you said to yourself I'm gonna gonna start this business and if you don't it's the day you registered right so I mean it's there's no magical day I mean I formed the company when I first started to do business as the company if your company blue steel photography didn't exist until yesterday right? So I can't say that my business started before yesterday because it's a separate entity right separate entity um the home office deduction we've talked about that the vehicle deduction putting your sign on your personal car doesn't make it deductible I see all these photographers driving around with you know sally lee photography llc come see me. I'm sally lee. That doesn't mean that your car is deductible. There's a couple irs publications, I direct your attention to uh nine. Seventeen for business use of your car and auto expense deductions pub for sixty three here's the key if you don't use your car fifty one percent of maurin business none of these deduction rules, we're gonna help you. You can't take your personal car and just deduct it because you have a photography business. That car has to be used fifty one percent arm or in business and if not it's not deductible and you actually have to recapture what you've deducted in prior years so you may need to keep a mileage log and you need to log every single business and personal mile in the car. You could get a business mile mileage log at staples or at office depot are online, but you have to track that mileage and if you don't, don't deduct it. Yeah, being in business or having your own business and also going to school to help set business is that combined like I'm I'm in school for photography. So right, but it also would coincide with my business or educational purposes for us when I saw that also be considered fifty one percent included on a warning they can't right off you go into school no going to school, getting an education to be a photographer, you can't write off that mileage, but if you're doing pro work while you're going to school, you can write off that mileage. Okay? So while you're in school, you're kind of in a difficult spot uh, let's finish with the last item that we're going to talk about for the bonus materials, which is let's retire and who wasn't online that told us we've gotta have ah, we've gotta have a plan for some retirement, right? Would there are different ways that we a small business owners khun, take advantage of, uh, federal law to get to set up a great retirement plan I like to use what's called the set, which is ah, small employers pension and that allows me at the end of the year and I don't even have to make this payment for last year until after I think it's a month after no it's due april fifteenth, so I have like january, february, march three and a half months to figure out how much money to put into it, but you can put if you set up a sep up to twenty five percent of your taxable income. Uh, that you make on any given year into a set. Now, you have to match that for other employees if you have employees, but I don't have any employees, so that allows me for whatever I make in my photography business in a given year to take that money imploded into a small employers pension, and it sits in my scott trade account that continues to grow and make money, and I didn't pay any taxes on it, and I got a deduction for taking that money out of my account, so I didn't have to pay taxes on twenty five thousand bucks in that tax year, if that's how much I put in, and then it grows tax free, and then I pay tax on it when I take it out. The bonus materials include a summary of all of the retirement plans they're available to creative professionals and it's. Fairly detailed retirement savings are super duper important, because if, if you don't have a retirement plan, you're going to retire, broke or never retire. Half, uh, of the retirement savings that were putting towards retirement is half of what it was fifty years ago, and data from the national institute on retirement security shows that the average working a age household on ly has three grand in retirement account assets, and the typical person that's near retirement only has twelve well, twelve and we'll get you too far, and if you're living in san fran, where you're paying three grand a month for a small apartment with a great view, you're not even going to make it till the end of the year before you're out on the street. So these are some really things that we need to think about when it comes to retirement savings. We as a nation, are baroque, we really are and it's just kind of where we're at, so we need to his photographers as we're planning and having a plan, even if it's bad plan is better than no plan if we have a plan to set aside as much as we can for retirement savings and make it a priority over starbucks. Sorry, starbucks. I am in seattle. I should have picked a different coffee. Um, if we make it a priority over starbucks, we have a chance. Give yourself a chance. Drink mcdonald's coffee and retire sooner. Seriously, uh, disability insurance is another one that you might want to think about. What's that mean, if you fall down the steps at the wedding and break your leg, uh, and you can't afford to make all of your equipment payments on your mortgage payments, what you gonna do? If you don't have that emergency five thousand dollars in the bank that is recommended everybody have you better have some disability insurance it's going to kick in and pay your salary while you're getting healthy um and likewise uh your page if you're living paycheck to paycheck it done work if you're not breathing uh and what that means is life insurance for your family is something you also ought to think about for a young creative with a family life insurance will never be cheaper I mean for five, six, seven, eight nine ten thousand or ten dollars a month, twenty dollars a month you can get a modest amount of life insurance that would pay a year or two of your your wages to your spouse in the event that something on unforeseen happened to you. So as we move towards wrapping up, I'd like you to consider the true cost of your passion. Um if we think of some studio space and utilities and cellphone, etcetera and so forth in advertising your total expenses for a modest photography business assuming that you wanted teo uh, might be about fifty six thousand dollars a year, how much would you have to do to make two actually make to break even to working at wal mart? We'd have to charge a minimum package charge of two thousand five hundred and sixteen dollars and shoot thirty weddings a year if you're a wedding photographer, so you gotta hustle, teo even equal what it would take to work at wal mart. What if you wanted to make the equivalent of forty thousand dollars a year or twenty dollars an hour? You'd have to earn one hundred and one thousand dollars a year and to have a minimum package charge of thirty, four hundred bucks and shoot thirty weddings a year. Now y'all can do this calculation on your own, put together a business budget and answer that question the very important question that I way started with right here don't bring it back around. What do you need? This number we came up with with seventy five thousand? So if we want to earn forty thousand a year, this is what we have to dio if you wanted to earn eighty thousand a year, you'd have to either shoot sixty weddings a year or you'd have to average almost seven thousand dollars per package on thirty weddings. Now, those numbers vary in markets, but I just encourage everybody to do that math on your own and make sure that you're setting the right goals for yourself. So here's, what we've covered, we've learned that we need a business plan, and we've learned the resource is to go out and find one. We've learned how to do a trademark search get a domain name we formed a new loc we've come up with a system to deal with our employees and contractors we now know what an accounting system consists of we've got some accounting basics and had a quick books intro we've talked about the tax considerations and deadlines to running our business we've had a real demonstration of copyright registration you now know all of the basics of a contract that you need to protect you and how to shield your personal assets and I think we've covered a lot more than that and if you haven't gotten a chance to hop online and pick up one of the business and legal form cds, go to craig heidemann with two ends dot com the creative live special prices on lee eighty nine dollars and I'll get one of those shipped out to you right away so if you have any questions after getting that form it's got my contact information in it uh when the cd comes feel free to email me and I'll do my best to help you with it so big thanks to creative life that's my contact information if anybody wants to get in touch with me off line and I really appreciate the opportunity to be here over the last two days it's been absolutely fantastic kray thank you and you know I often ask an instructor at this moment. Any final thoughts, there's. Any final thought you'd like to give us for today, hope is not a strategy. We've gotta have a plan. And I think in the educational, the photographic educational marketplace these days, there is a great place for inspiration and there's, a great place for technical training. But unfortunately, people neglect getting a little bit of business training, and and I think that helps us. That helps keep us from achieving our potential. So recognizing that this this way, business aspect of our passion is justus important is our creative aspect of our passion. I think, goes a long way towards making sure that our businesses will be around for longer than a year.