Helping a $900k Painting Business Owner Save Big in Tax

We walk through how to use a business to create personal financial benefits legally, focusing on deductions you can defend with documentation. We compare practical tax strategies for a service business, including meeting-based deductions, reimbursements for home and phone costs, and vehicle write-offs. 
• establishing baseline income sources and what changes in 2026 
• setting up a Board of Advisors with friends or family and documenting meetings 
• deducting board meeting meals and advisor travel with the right percentages 
• stacking the Augusta Rule to rent your home to your business up to 14 days 
• understanding related party transaction risk and mitigating it with a home swap 
• using an accountable plan to reimburse home office, Wi-Fi, and cell phone use 
• choosing mileage vs actual costs and depreciation for a higher-priced vehicle 
• avoiding “buy stuff to save taxes” thinking and focusing on real expenses 

This episode was originally recorded as a video for YouTube.

If you hear me say things like “in this video” or reference visuals, don’t worry —
the content still works perfectly in audio form.

And if you ever want to watch the video version, you can find it on the
 Profitable Painter YouTube channel.

https://www.youtube.com/@BookkeepingForPainters

Transcript

SPEAKER_01 0:00

Basically, it looks like your question is how do I use my business legally to my advantage personally? This can be tax savings, business expenses, etc. So love the question. I think that's really cuts to the core of it. So I'd love to dive in first. Um just want to establish some baseline information to make sure the strategies I'm

Setting The Income Baseline

SPEAKER_01 0:21

gonna recommend make sense for your situation. So, first off, looking at uh your situation, it looks like you're over the last 12 months done about 900K in revenue in the business, netting about between net profit and officer salary, a little over $100,000. And it looks like looking at your 2024 tax return, you also had some W-2 wages for yourself and your spouse. Is that still gonna be in play for 2026?

SPEAKER_00 0:50

Yes, is it gonna be about except for my my W 2 wages won't wouldn't be, but hers would be all right.

SPEAKER_01 0:55

So about $150,000 and uh W-2 wages roughly for her, uh would be a little more.

SPEAKER_00 1:03

Um, and then I'm I'm paying myself through the business. You know, I'm paying myself, so I guess I would have W-2 wages, just not as much.

SPEAKER_01 1:09

Right, exactly. So roughly $200K for her?

SPEAKER_00 1:14

Say $200 to $250.

SPEAKER_01 1:16

Gotcha. And then I I know you also had some other partnerships going on. Are any of them going to be providing income in 2026?

SPEAKER_00 1:24

If they are, it wouldn't be that much. Um, there's some rental property, some commercial buildings we've done some investments in, but I'm not sure what the those are those will get paid out quarterly. I'm not sure what the return on it is. We should be getting that first quarterly check uh the next week.

SPEAKER_01 1:38

Um, but not nothing like too substantial. No, I don't think it's gonna be aging. So uh your spouse's WT wages in your painting business. That's it, really, for the main core of what you're making. Cool. And then I noticed you had uh a couple kids, which is awesome. I have four kids myself. Uh he looks like you had two. What are they above the age of seven or older?

SPEAKER_00 1:59

They're not. And there's uh we have three.

SPEAKER_01 2:02

Oh, okay. Congratulations. Thank you. All right. So you're you're really in the thick of it right now, uh, six and below uh for all three kids. All right, cool. So um I'm gonna go through a couple strategies to see you. You might have employed them, but obviously we'll just go through and see what what works for your situation. So uh the first one, um, have you heard of the Augusta rule? Yes. Cool. Have you ever used the Augusta rule before? I have not. Cool. Let's go through this and then how you can

Introducing Tax Strategies That Fit

SPEAKER_01 2:33

stack it with another uh tax strategy called the Board of Advisors. So I'm gonna start with the Board of Advisors first. Do you have a board of advisors

Board Of Advisors Done Right

SPEAKER_01 2:42

in your business for your painting business?

SPEAKER_00 2:44

I do not. It's just me. All the legal paperwork and everything is just me. Cool.

SPEAKER_01 2:50

So a board of advisors basically is a set of people that you just get advice from. And this just a formal relationship that you don't have to compensate these people. They can literally be friends and family. And right now, friends and family are probably already giving you unsolicited advice about what you should do uh with your businesses or whatever. So all you need to do basically is formalize this relationship by putting it in your operating agreement and take minutes, take uh notes during those meetings. And you can have these meetings if you you know, typically people are getting together with their friends and family like uh 4th of July, which is coming up during holidays, Thanksgiving, Christmas. And we we have some clients that they'll actually have their board of advisors, they'll have a barbecue on 4th of July or Thanksgiving dinner, and they'll have those board of advisors, which are friends and family, come over. And now that meal where they discuss, maybe at the beginning of the meal, they discuss some of the goals of the business, getting feedback from their friends and family who are also on their board of advisors, board of directors, getting that feedback from them and then just taking some notes. And now that meal and that event is tax deductible. And this is something that because all these big corporations, they have board of directors, right? So they're using this all the time. So all it is is basically you just using it at your level and setting that up, formalizing those relationships. You don't have to compensate them, it just allows you really to deduct those events that occur naturally already. Does that make sense? Yeah, so let's build on that a little bit. So we talked about the meals can be deductible. Also, if you have folks that are out of town, maybe you have friends or family members that you want to put on your board of advisors, but maybe they live out of state or so now you can cover the cost of the flight in for them so that they can attend the board of advisors meeting at your home,

Deductible Meals And Travel Rules

SPEAKER_01 4:53

or it doesn't have to be at your home, but could be anywhere. But basically, now you can deduct the cost of travel for them as well. And this is useful for folks. We have folks that have older kids and they're they put their kids on the board of advisors, and so now they have a deductible reason to fly their kids back home during the summers or whatever.

SPEAKER_00 5:11

And when we say that stuff's deductible, um, is it a hundred percent deduction? Is it a 25% deduction? Like that, I think that's something that for a lay accounting person like myself, uh, when we hear deduction, it what does that actually I guess mean?

SPEAKER_01 5:27

Right. Great question. So for the travel, it's 100% deductible. You're they're covering the travel on the low end for meals, it would be 50%. But uh so we'll say 50% for for meals. Sometimes meals can be 100% deductible if it's for employees for the benefit of the employee. In this case, board of advisors. So we'll stick with 50% deductible for meals. So we got travel meals. Now we can throw in a third thing, which is the rental of the home, right? So the idea here would be that your business is going to rent your home for the purpose of those court, let's just say quarterly board of advisor meetings, or maybe also a company yearly meeting and not to exceed

Stacking The Augusta Rule

SPEAKER_01 6:12

14 days. And so this is taking in the uh Augusta rule, stacking this Augusta rule tax strategy on top of the board of advisors tax strategy. So the Augusta rule says basically you can rent out your home for up to 14 days, and any income you get for that rental, you don't have to pay income tax on those that rental income. So it's basically tax-free money that you can get on the personal side. So the idea here would be is your business has an expense for renting a home, but you don't have the income because it would be you'd be renting your home for less than 14 days. Uh, do you do you rent your home at all right now? Not right now. So this might be something you could stack on top of this strategy. Now, there is a uh a higher the board of advisors tax strategy is pretty low risk, meaning that it's as long as you have documented the meetings and you have the people listed on your operating agreement as the board of directors or board of advisors, it's pretty low risk as long as you have the documentation to support it. The renting your home

Reducing Risk With A Home Swap

SPEAKER_01 7:16

to your business is a higher risk strategy because it's uh basically related party transaction where you own your home, you own the business, and now they're doing business together, it's uh it's a related party transaction which is scrutinized more heavily. So the way around this, or the way to mitigate this risk, is to get uh, I'm assuming you have some sort of um friendly relationship with another business owner in your area. So you could get with another business owner in your area and swap homes with them, basically, and say, hey, I'm doing this thing where we're holding quarterly board of advisor meetings. I'm right now I'm running it to my home to my company, but I want to mitigate the risk and still get the tax deduction. So would you want to swap homes where basically during that time frame, you rent my home, I'll rent your home. And if they're this about the same uh size home on Zillow, about the same value, it basically could be a transaction where no money is actually exchanged hands, but you both get a deduction on each of your books. So that the net effect is that you're renting their home, they're renting your home, they have a deduction on their books. Uh, assuming both of you rent your home for less than 14 days during the year, none of that income is reported to you personally. So that is uh something else you can layer on top of the strategy. So does that make sense?

SPEAKER_00 8:41

Yeah, and like you said, it's four it's 14 days cumulative through a rolling 12-month period, I'm assuming. Um the uh the tax year.

SPEAKER_01 8:49

So assuming your calendar calendar year taxpayer January through December. So just to go through the numbers here, if you and again, I'm not just to be clear, I'm not saying you need to, we're not accruing additional expenses that we're we don't already have, right? Meaning that I don't want if you're okay, you you're tracking me that I don't want you to start to hold all these events that you wouldn't have normally held to save money in taxes.

SPEAKER_00 9:16

So just want to make sure that's well, I think I think that's something that a lot of even an unsolicited advice from family, right? There's a lot of people on Instagram and things like that that will give you advice on how to run your business in loopholes and stuff like that. And one, uh, it's not as it's not ever as clear as it's stated in a five-second reel. And then two, you have to have the money to pay for it. So it's not like you just don't pay for things, you still have to pay for the money. Like you said, then it gets uh maybe taken off your taxes or something like that, where it can be a useful tool if you have the capability for that, but that's not just always the case. Right.

SPEAKER_01 9:54

Is this uh a strategy that makes sense for your situation, you think?

SPEAKER_00 9:58

Yeah, I think I think so. And uh and there's other things I've been told from previous CPA work I've worked with before, just things around vehicles and even cell phone expenses and uh internet and stuff like that, where it kind of needs to be separated, keep keep personal business, business, and stuff like that. And so I'm trying to figure out if that was that good advice. Is there a better way to do it where maybe I am offsetting some personal expenses via the business? Um, but obviously, like you said, not opening myself up to some massive audit. Um sorry, your picture's like frozen, so it's kind of throwing me. You have a disappointing look on your face.

SPEAKER_01 10:36

Oh, cool. Well, hopefully that resolves itself. But uh, so it sounds like it's what we accountants call an accountable plan, which is basically a reimbursement plan where you are going to you have maybe an area in your home that you use regularly and exclusively for business. I'd imagine, right? So that could be uh a home

Accountable Plan For Home Expenses

SPEAKER_01 10:59

office deduction where your business will reimburse you for the use of that area. Then on top of that, you probably have cell phone that you use or computer, Wi-Fi, that sort of thing. Those things, a portion of that can be reimbursed by the company. Uh, so it would be a deduction to the company that would you usually want to do your accountable plan once a month or at least once a quarter. Or you um, and we'll set you up with this. Basically, it's a spreadsheet you fill out to calculate how much of a deduction we should put on your books because no money is going to exchange can just basically just getting in a deduction because you're paying for it on the personal side. You're paying for your Wi-Fi, your cell phone, most cases, your rent or your mortgage interest, whatever on the personal side. But we want to get a portion of that captured in your books under your accountable plan or reimbursement plan so that you get credit for on the tax side for your business. Uh, so we will definitely go through that uh spreadsheet with you um in your next tax planning meeting to get those basics. Uh, in addition to that, is uh vehicles. I think you mentioned um, do you have a vehicle that is one?

SPEAKER_00 12:10

I got a new vehicle last year, so I had the business. And at the time I that was my CPA's advice was buy it personally so you can write off the mileage that you use for the business. And but that was kind of where we

Vehicle Write-Offs Mileage Or Depreciation

SPEAKER_00 12:23

landed on that. Because he just asked me, blanket, is this only going to be used for business? And I'm like, nope, it's gonna be used for personal stuff as well. And he was like, then then buy it personally, and whatever the truck note is, pay yourself that monthly from the business to basically pay for the truck out of the the business's the business's name is not anywhere on the truck's title or anything like that. But that was the advice that I I got for that purchase, and then same thing, people or again the all the unsolicited advice and stuff like that. And I'm like, Well, I it made sense whenever he explained it to me, but is that accurate, I guess, or was that so from vehicle?

SPEAKER_01 12:57

There's two ways you can take a deduction. You can either take mileage or you can take actual costs, aka depreciation. So how much was the vehicle that you purchased last year?

SPEAKER_00 13:07

Oh, I think it was I want to say 64, 65, 65,000.

SPEAKER_01 13:12

Sorry. So, and then how many miles do you think you're putting on that business miles per year?

SPEAKER_00 13:19

Per year, probably somewhere between 15 and 20,000, I would think.

SPEAKER_01 13:23

So 20,000 you get like 72.5 cents per mile in 2026. So if you put 20,000 miles on your vehicle, you get roughly 14,000 deduction on for mileage. And you can basically take is assuming you you do about the same mileage every year, you can continue to take that 14,000 deduction. In the mileage, I should say the mileage rate goes up every year by a couple cents, so it might increase as well. But uh at least $14,000, assuming you're doing about $20,000 in miles, you can take that mileage deduction year over year for however many years you have the vehicle in service and you're driving those miles. The actual cost could make sense if you because this is where you're taking depreciation. If you have a higher priced vehicle, I usually say as a rough rule of thumb, over fifty thousand dollars in price, it could make sense to take the um depreciation of the vehicle, assuming that it is a business vehicle, which is kind of why your accountant asked about the is it gonna be used exclusively for the business or is it gonna be in the registered in the business name? It might make sense to take depreciation for a higher cost vehicle because that's $65,000. You spread it over the course of a few years. Um, it it might from a tax perspective, you might get more deduction, at least over the next three to seven years, by taking depreciation than taking mileage. If it's a low-cost vehicle, it's usually a no-brainer. If it's like a $20,000 vehicle, then definitely take mileage. That makes it's a no-brainer uh result. When it's a higher price vehicle, it's kind of like you could go either way. So now the good thing that you took mileage first was that you can always switch to depreciation later. So if you put the vehicle and registered in the business's name, you can switch to taking depreciation even when you've taken a year or two of mileage. Uh, but you can't do it the other way around where you take depreciation and then switch to mileage. So you do have some flexibility uh by taking in mileage in the first year.

SPEAKER_00 15:28

Because I think that what again, I think misconception, or maybe it's my misconception, misconception, is just around we said the internet phone bills and stuff like that, gas and my wife's car, stuff like that. That the only real way to do it kind of correctly, I'll say, is to have it where it's money on paper that's coming off of a deduction versus business credit card being tied to the internet bill or the bit or the phones all being paid for by the business, right? Whether it's my wife's cell phone as an example. Yeah, even my personal cell phone, I still use my personal cell phone for business, but I don't have that running. You know, the business is not paying for it though. Right. So is that correct in understanding?

SPEAKER_01 16:09

Yeah, so you can still pay for it personally, like you're doing, but what we want to do, and we'll we're gonna do this in our Richards meeting with you for tax planning. He'll basically give you this spreadsheet to fill out each quarter, um, each mining session, and it's gonna capture those personal expenses you made and make sure that those personal expenses that are really business or at least a partly business get recorded in the books as a journal entry to even though the business didn't actually physically pay for that, you're gonna get credit for on your books because we're gonna capture that through your accountable plan, fill out a spreadsheet to record that information, how much a portion of your cell phone bill, a portion of your home office, uh, the miles that you're you're driving in your vehicle, capture all that each quarter, record it in your books, and then it's gonna show up on your tax return uh to lower your taxes.

SPEAKER_00 17:04

And I know we're over time. Last question for the board of advisors is that, like I said, friends, family, for each board of advisors meeting, does everyone need to be present for it to count, or is there a 60% threshold you need to hit?

SPEAKER_01 17:18

Or no, you don't need to have a certain amount. Um, as long as you have whoever documented as a board of advisor

Documentation Standards And Wrap Up

SPEAKER_01 17:25

on your board and you keep minutes, you track what was said, and you keep receipts normal, you'll you're covered there. Not everyone has to be present. And so obviously you need to be there, the owner, uh, some representative, and then the uh at least a couple board of uh board of advisors, so you can justify we had the portion of our board there. Sounds good. Cool.

SPEAKER_00 17:50

All right, awesome.

SPEAKER_01 17:51

Was this uh helpful?

SPEAKER_00 17:53

Yeah, absolutely. It's great to get some real answers from a real professional. All right, awesome. Glad to hear it.