Tax Deductions - You are better off keeping your money

If you have ever heard the phrase “100% tax deductible” and believed it keep reading. I hate this phrase, amongst many others, because it is misleading and just plain WRONG! This phrase makes most people think that if they spend $1 then they will save $1 in taxes. If you haven’t figured out based on my tone of voice that this is wrong then here it is. THIS IS 100% WRONG AND 100% BS!!!

Taxes are a percentage of your income. Percentages vary but for your average person the average tax rate is between 20-30% once all the tax credits are factored into the equation. So for those of you that don’t speak tax, or don’t speak accountant, this means that when you spend $1 dollar you DON’T have to give the government 30 cents. Stay with me. This also means that you gave someone else your $1. Hmmmm. Work with me here. If I DON’T spend the $1 I will have to give the government 30 cents, but I will get to keep the other 70 cents. But if I spend the $1 then I DON’T have to give the government 30 cents, but I don’t have the $1 anymore either. That SUCKS!!

Do you get it? If you don’t spend the money you get to keep 70 cents. Now, before you have an aneurism I am not saying don’t buy stuff for your business. What I am saying is be smart about it. DO NOT spend money just to save taxes. If you do you are pissing away $1 just to save 30 cents. Thanks but I would rather keep the $1 give the government their 30 cents. If your car works keep it. If your computer works keep it. Don’t buy new ones unless you absolutely need them.

If you want to have your cake and eat it too, then invest in RRSP’s. You get to keep all your money and the government gives you 30 cents per dollar off your taxes. Now that’s a plan.