Business Revenue: $1,000
- Business Expenses: -$0
Taxable Profit: $1,000
- 10% Tax on Profit: -$100
Final Net Income: $900
Lesson: By deducting actual business expenses, the company pays taxes on a MUCH smaller profit! This keeps the business competitive!
Personal Salary: $500
- Personal write-offs: -$0
Taxable Income: $500
- 10% Tax on Salary: -$50
Take-Home Pay: $450
- Personal Fun Expenses: -$0
Money left in Bank: $0
Lesson: Personal expenses (toys, movies) CANNOT be deducted from your taxes! You pay tax on your full salary, and buy fun things with what's left.