HVAC Business Owner
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We consulted with a client and implemented a tax savings plan starting in 2015. The client had left their W-2 job, and transitioned to a consulting role and was self-employed, and the spouse had other significant W-2 income. The client quickly began generating about $300,000 annually in consistent income in the new venture, had no employees, all expenses were reimbursed, generating approximately $115,000 in annual tax liabilities.
Retirement contributions were already maxed out, itemized deductions, college benefits were being limited, and every year the client had an increasing amount due at tax return filing, and felt like they could never catch up with the increasing burden.
Fortunately, they called one of our Managing Directors at credo accounting and tax!
The plan
The client was particularly in favor of tax deferral, and being in the markets with a more aggressive investment strategy. Based on the client’s preferences, cash flow needs, and budget, we designed their custom tax plan with:
- a focused retirement strategy contributing approximately $250,000 annually into retirement,
- optimized the corporate structure to reduce the rates and provide an opportunity for enhanced reimbursements and deductions for previously non-deductible items,
- shifted income to college age children to pay for college tax free,
- implemented an insurance strategy through the business to make the payments tax-deductible
The results
Combined Federal & State taxes were reduced from $116,000 per year to: 2016 – $83,026 2017 – $45,626 2018 – $11,027 In only three years, the client’s net worth increased by over $200,000, with zero investment risk, the client has a guaranteed lifetime retirement income benefit in excess of what they previously thought was unreachable. The client is in a position after only three years to retire comfortably, compared to their desired goal of 5-7 years that was unreachable under their previous plan, and the client has been taking the opportunity to travel the world with family, now that there is a clear path forward.
