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THE TAX STRATEGY PLAYBOOK
*A TALE OF TWO TAXPAYERS IN MONROE, NC
JOHN: REACTIVE TAXPAYER
Annual Income: $175,000
Tax Approach: Files taxes each April
Tax Knowledge: Basic understanding of deductions
Business Structure: Sole proprietor
Retirement Plan: Basic IRA contribution
Vehicle Strategy: Takes standard mileage deduction
Year-End Actions: None - waits for tax season
Federal Tax Bill: $42,650
Annual Tax Savings: $0
10-Year Savings: $0
SARAH: STRATEGIC TAXPAYER
Annual Income: $175,000
Tax Approach: Works with a tax strategist year-round
Tax Knowledge: Implements proactive tax reduction strategies
Business Structure: S-Corporation with optimized salary/distribution
Retirement Plan: Custom-designed retirement plan
Vehicle Strategy: Structured vehicle ownership for maximum benefit
Year-End Actions: Implements strategic purchases and deferrals
Federal Tax Bill: $27,300
Annual Tax Savings: $15,350
10-Year Savings: $153,500+
Same income. Same town. $15,350 difference in taxes paid.
The only difference? Sarah uses strategic tax planning from Your Financial Solutions in Monroe, NC.
LEVEL 1:
BEGINNER TAX STRATEGIES
THE FOUNDATION MOVES
BUSINESS STRUCTURE OPTIMIZATION
POTENTIAL SAVINGS: $5,000-$15,000 ANNUALLY
Most Monroe business owners operate as sole proprietors or single-member LLCs by default, subjecting all their profits to self-employment tax (15.3%). By restructuring as an S-Corporation and implementing a reasonable salary strategy, you can legally reduce this tax burden significantly.
REACTIVE APPROACH:
John runs his Monroe consulting business as a sole proprietor. His $120,000 profit is fully subject to self-employment tax, costing him $18,360 in SE tax alone.
STRATEGIC APPROACH:
Sarah operates the same business as an S-Corporation, takes a reasonable salary of $70,000, and distributes the remaining $50,000 as a dividend. She pays SE tax only on the $70,000, saving $7,650 in taxes annually.
RETIREMENT PLAN SELECTION
POTENTIAL SAVINGS: $3,000-$20,000 ANNUALLY
The right retirement plan does more than build your nest egg, it creates immediate tax deductions that can dramatically reduce your current tax bill.
REACTIVE APPROACH:
John contributes $6,000 to a traditional IRA, the maximum allowed. This reduces his tax bill by approximately $1,320.
STRATEGIC APPROACH:
Sarah implements a Solo 401(k) that allows her to contribute $22,500 as an employee plus an additional employer contribution, for a total of $43,000. This reduces her current tax bill by $9,460, a difference of $8,140 compared to John.
HEALTH BENEFIT PLANNING
POTENTIAL SAVINGS: $2,000-$7,500 ANNUALLY
Healthcare costs are significant for most Monroe residents, but with proper planning, these expenses can generate substantial tax benefits.
REACTIVE APPROACH:
John pays for health insurance personally and deducts the premiums on his Schedule C. His other medical expenses don't exceed the standard deduction threshold, so they provide no tax benefit.
STRATEGIC APPROACH:
Sarah implements a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) for her business, allowing her to deduct all health insurance premiums plus out-of-pocket medical expenses.
This comprehensive approach saves her $3,300 in taxes annually.
LEVEL 2:
INTERMEDIATE TAX STRATEGIES
ADVANCING YOUR POSITION
INCOME TIMING MANIPULATION
POTENTIAL SAVINGS: $2,500-$10,000 ANNUALLY
Strategic timing of income recognition can keep you in lower tax brackets and maximize the value of deductions and credits.
REACTIVE APPROACH:
John invoices clients when work is completed, resulting in an uneven income stream that pushes him into higher tax brackets during busy months. His December invoicing creates a large tax bill the following April.
STRATEGIC APPROACH:
Sarah works with our Monroe tax strategists to time her client invoicing, pushing December income to January when strategic, and accelerating expenses at year-end to offset higher-income periods. This approach saves her $4,200 in taxes.
VEHICLE ACQUISITION PLANNING
POTENTIAL SAVINGS: $3,000-$25,000 OVER 5 YEARS
The way you acquire and use vehicles for business can dramatically impact your tax situation, especially with recent tax law changes.
REACTIVE APPROACH:
John uses his personal SUV for business and takes the standard mileage deduction of $0.67 per mile. With 10,000 business miles annually, his deduction is $6,700.
STRATEGIC APPROACH:
Sarah works with our tax team to implement a heavy SUV strategy with bonus depreciation, allowing her to deduct $30,000 in the first year alone, plus mileage costs in subsequent years. Over five years, she saves $15,400 more than John.
FAMILY EMPLOYMENT
POTENTIAL SAVINGS: $2,000-$12,000 ANNUALLY
Employing family members can shift income to lower tax brackets while teaching valuable business skills.
REACTIVE APPROACH:
John gives his children allowances from his after-tax income, providing no tax benefit.
STRATEGIC APPROACH:
Sarah formally employs her two teenagers in legitimate roles in her business, shifting $12,000 of income to their lower tax brackets and teaching them entrepreneurial skills.
This strategy saves the family $2,640 in taxes.
LEVEL 3:
ADVANCED TAX STRATEGIES
MASTER-LEVEL MOVES
DEFINED BENEFIT PENSION PLANNING
POTENTIAL SAVINGS: $20,000-$100,000+ ANNUALLY
For high-income Monroe professionals, a properly designed defined benefit plan can allow for massive tax-deferred retirement contributions.
REACTIVE APPROACH:
John maxes out his SEP IRA at $30,000, reducing his tax bill by $6,600.
STRATEGIC APPROACH:
Sarah implements a custom defined benefit plan allowing her to contribute $150,000 annually on a tax-deferred basis, reducing her current tax bill by $33,000, a difference of $26,400 compared to John.
COST SEGREGATION FOR REAL ESTATE
POTENTIAL SAVINGS: $10,000-$100,000+ (TIMING)
If you own commercial real estate in Union County, cost segregation studies can accelerate depreciation deductions and dramatically reduce current tax bills.
REACTIVE APPROACH:
John purchased a $500,000 commercial building for his business and depreciates it over 39 years, resulting in an annual deduction of approximately $12,800.
STRATEGIC APPROACH:
Sarah conducts a cost segregation study on her identical property, legally reclassifying 25% of the building components to 5-year or 15-year property. This accelerates depreciation and creates $75,000 in additional deductions in the first five years, saving her $16,500 in taxes during that period.
CHARITABLE REMAINDER TRUSTS
POTENTIAL SAVINGS: VARIES WIDELY BASED ON ASSETS
For Monroe residents with appreciated assets, charitable remainder trusts can provide immediate tax deductions while generating income and supporting causes you care about.
REACTIVE APPROACH:
John sells appreciated stock to diversify his portfolio, paying capital gains tax on the appreciation.
STRATEGIC APPROACH:
Sarah transfers appreciated stock to a charitable remainder trust, receiving an immediate tax deduction, avoiding capital gains tax, generating income for life, and ultimately supporting her favorite charity. On a $200,000 asset with $150,000 of appreciation, this strategy saves her approximately $35,700 in taxes.
THE TAX STRATEGY GAME BOARD: MONROE, NC EDITION
LOCAL TAX CONSIDERATIONS
Strategic tax planning isn't just about federal taxes, it must account for specific North Carolina and Monroe considerations:
INDUSTRY-SPECIFIC STRATEGIES
Different Monroe businesses benefit from different approaches:
REAL ESTATE PROFESSIONALS
- Short-term rental optimization
- Cost segregation studies
- Real estate professional
status qualification
- 1031 exchange planning
- Opportunity zone investments
- 1031 exchange planning
- Opportunity zone investments
MEDICAL PROFESSIONALS
- Practice structure optimization
- Equipment purchase timing
- Retirement plan maximization
- Building ownership strategies
- Staff benefit planning
- Equipment purchase timing
- Retirement plan maximization
- Building ownership strategies
- Staff benefit planning
CONSTRUCTION CONTRACTORS
- Accounting method selection
- Contract timing strategies
- Equipment depreciation planning
- Material purchase timing
- Contract timing strategies
- Equipment depreciation planning
- Material purchase timing
- Labor cost optimization
RETAIL BUSINESSES
- Inventory method selection
- UNICAP planning
- Sales tax optimization
- Lease vs. buy analysis
- Point-of-sale integration for tax documentation
- UNICAP planning
- Sales tax optimization
- Lease vs. buy analysis
- Point-of-sale integration for tax documentation
THE TAX PLANNING PROCESS: STRATEGIC MOVES
THE TAX STRATEGY SCOREBOARD
Strategy Implemented:
S-Corporation Formation - $12,750 (annually) ; $127,500 (10+ years)
Retirement Plan Optimization - $15,400 (annually) ; $154,000 (10+ years)
Home Office Maximization - $2,200 (annually) ; $22,000 (10+ years)
Vehicle Strategy - $4,500 (annually) ; $45,000 (10+ years)
Family Employment - $3,800 (annually) ; $38,000 (10+ years)
Health Benefit Planning - $4,300 (annually) ; $43,000 (10+ years)
TOTAL SAVINGS
$42,950 (annually) ; $429,500 (10+ years)
Strategy Implemented:
Entity Structuring - $18,500 (annually) ; $185,000 (10+ years)
Defined Benefit Plan - $74,800 (annually) ; $748,000 (10+ years)
Real Estate Acquisition - $22,400 (annually) ; $224,000 (10+ years)
Income Timing Strategy - $12,300 (annually) ; $123,000 (10+ years)
State Tax Minimization - $8,500 (annually) ; $85,000 (10+ years)
Charitable Planning - $15,700 (annually) ; $157,000 (10+ years)
TOTAL SAVINGS
$152,200 (annually) ; $1,522,000 (10+ years)
YOUR NEXT STRATEGIC MOVE
The difference between tax preparation and tax planning is the difference between reaction and strategy. One looks backward at what already happened; the other looks forward to create better outcomes.
Every day you operate without a tax strategy is a day you're likely overpaying. The best time to implement strategic tax planning was years ago. The second-best time is today.
Contact Your Financial Solutions for a Tax Strategy Session and discover how much you could be saving. Our Monroe NC tax strategists will analyze your specific situation and identify opportunities to legally reduce your tax burden.