MLM Tax Savings Comes From Losses

One of the most common benefits stated by promoters of MLM (multi level marketing or network marketing) opportunities is that you’ll save on your taxes or reduce your tax bill.

For a business to “help you” or reduce your tax bill, you will have to lose money in that business. To state this simply if your business loses money it reduces your taxable income. That means if you were to get a refund before adding the business to your return you’ll get a bigger refund after adding your business loss. Or if you owed before adding the business loss you’ll either owe less or get refund after adding the business loss.

There are two purposes people start a for profit business. One is to provide a product or service that isn’t provided, or provide it better. The other purpose is to make a profit. If making a profit doesn’t matter then we’d start a nonprofit.

If your business makes money (we all want make money) your taxable income will increase. That means you’ll get a smaller refund or increase the amount of your tax you owe. We always try to explain to our clients that we’ll do our best to make sure they’ll pay the least tax they legally can. But, if you’re paying taxes that means your business is profitable.

Many business owners realize a loss after the first few years. That doesn’t mean that the owners thought of that as a benefit prior to starting the business. Landlords are an example of this. Depending on purchase and maintenance costs along with rental income. While landlords may have a paper loss for tax purposes they may actually realize a profit. Even if they’re not making a profit while owning the property they’re looking forward to selling the appreciated property.

A bigger tax refund or smaller tax liability is one of the few positives of your business operating at a lost. But it should never be a goal of your business. You started a business to increase your income. If the promoters of an opportunity are toting bigger refunds as a benefit of getting into that opportunity, you may want to investigate other opportunities.

#deductions #mlm #losses