Children need to know about tax breaks and benefits

Children need to know about tax benefits and tax breaks

If you want your child to learn about money, business and be successful – talk to them about the benefits of “Tax write off’s”. That is right, tell your child about the wonderful world of taxes and then tell them the deference between the write off’s a regular person has and that of a business owner has.

Why do I bring this up, because as I spent some time with my daughter last night – making jewelry pieces; she said something that gave me hope. She said “Dad, it’s good to have your own business.” She doesn’t realize how good it really is just yet.

I have spoken to my daughter about the general differences in tax burdens between the rich and the poor [ meaning the working class ]. She understands that the working class pays more taxes than the rich because of the lack of knowledge and no working class tax breaks. But once I am done with this years tax process – I have decided to show her how it works in the real world.

Now, I’m not going to bore you with all the possible tax write off’s a business gets – you should get professional help for that. But in general I will tell you how I plan to explain a difficult tax system to my 12 year old and the benefits I personally see.

Tax benefits for having own business [ * even if only side business ]

1- Tax write off’s : you can write off in whole or in part things like a new car, a new computer, business supplies, and even things like health care. Yes it all has to be for the business but – it belongs to you, you use it and you get tax break.
2- Deferred tax burden: employees have their taxes taken immediately they get paid, companies can have their tax burden deferred to every quarter or even till the end of the year.
3- Pay less taxes: here is a double whammy (a.) business’ like corporations can pay fewer taxes than the average person even though they make much more money. (b.) if you have a side business you can claim all your dependants pay as little taxes as possible on your employee check and still get government money back at end of year.
4- You can itemize: my tax guy told me not to itemize on my personal taxes unless my itemizing gave me more than the government allowed tax break for being married ($6,000) and of course there are little to no tax breaks to itemize on the employee side of the tax table. But, in a business you can itemize several items and as you can see by example #1 it can get very beneficial.
5- You do not have to cheat, lie, steal: it’s all legal and above board. All you have to do is know the laws, follow them and get the benefits [ this is where a good tax person helps ]. Plus your tax person should always prepare you for next year.

Now what does all that mean to a twelve year old ?
It means that even though a business can be fun and can be difficult – when you look at the big picture you can see the larger benefits, gains, monetary value. Most people say they want to be in business because they want to be the boss, in control, have freedom. But the truth behind it is based on money. Not to sound greedy or too capitalist, but think about it, being the boss, freedom – it is simply away of saying I have the money to do what I want.

My daughter tells me that she wants her own business but still wants to grow up to be a doctor. Hey, that’s fine with me. Having a business will give her the freedom she needs to do what ever she wants – be a doctor, lawyer, a school teacher if she wants, as long as she has a profitable business to take advantage of all the American opportunities.

Does your child “Have big Dreams”

Like I said, my daughter wants to be a doctor, for awhile she wanted to be an astronaut – all children have big dreams. Like me and many Americans those dreams are squashed or pushed aside because they do not have the financial freedom to even try to attempt them.

As a parent we all want the best for our kids, but between high cost of living, taxes and living – some of us can barely afford to live week to week. Your child may not become the next Bill Gates or even a millionaire, but you don’t need millions to live comfortably. Then again, your Childs small business may propel him / her to bigger and brighter opportunities. All I am saying is, atleast give them a chance.