Have you paid $250,000 in income taxes in any single year?
Yes? Then CONGRATULATIONS. You are making great money in your business. You are on your way to creating wealth. You are on your way to developing the freedom that a strong net worth can breathe into your life.
If you have a business that is a pass through entity for tax purposes (S corporation, LLC, etc.) and your taxable income from the business is in the $650,000 range, then you are going to pay something like $250,000 in income taxes.
Lots of people think that's bad. They say, "Surely there is a way to lower that 'huge tax hit' I am having to take".
But that way of thinking is one of the primary reasons so few business ever make any serious money. They mistakenly believe that their objective is to reduce their income taxes. It's not.
The objective is to increase your income.
And when you are successful at increasing your income (by making more money) you pay more in income taxes. That's how business works.
Is Your AGI Growing?
Take a look at your personal tax return (Form 1040) for the last three years. Write down your Adjusted Gross Income (AGI) from line 37. Then ask yourself:
"What would it take to increase my AGI next year by 50%"?
For most business owners, the best way to increase their personal AGI is for their business to become more profitable. (Remember, I am assuming your business is a pass through entity for tax purposes.)
Consider spending more of your time in business focused on becoming more profitable. Setting targets for increasing your AGI is a great way to start.
That's how you create financial health, wealth and freedom. J
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