How an Eye Care Clinic obtained $82,000 annual tax savings with the help of Cerebral Tax Advisors

The Client

Business/IndustryEye Care
LocationWashington State
Business Inception2017
Number of Employees12
Estimated Annual Gross Income$1,000,000

The Problem

This Eye Care Clinic came to Cerebral to overcome the following challenges:

  • Reactive advising instead of proactive planning
  • Paying more in taxes than anticipated
  • Looking to expand their current location and planning to expand to another clinic

The Solutions

After analyzing the clinic situation in detail, Cerebral Tax Advisors worked with the client to implement the following tactics and strategies. 

  1. Opening a 401k Profit Sharing with Cash Balance retirement account for the practice owner, through the clinic and offering his employees the same benefit.  The cash balance plan allowed him to contribute more to his retirement than a SIMPLE or 401k Profit Sharing plan alone.  Also, by offering his eligible employees the same benefit he was able to foster more loyalty to the business while, at the same time, creating additional tax deductions. 
    • ANNUAL SAVINGS = $53,059
  1. Hiring his son as an employee of the Eye Care Clinic. In this case, we recommended the clinic owner to hire his son with a $6,000 monthly salary.  This allowed them to shift income that would have otherwise been taxed at a higher rate and, also, use this earned income to contribute to his children’s Roth IRA. 
    • ANNUAL SAVINGS = $3,752
  1. Gifting his equipment and then leasing it back.  Being a business with a large amount of medical (and expensive) equipment, made the clinic a great candidate for what is called the Leaseback Strategy.  It involves gifting the equipment to a family member who will, in turn, lease it back to the business.  This strategy allowed them to shift income from a higher tax bracket to a family member’s tax bracket, while at the same time deducting the rental expense from the business income. 
    • ANNUAL SAVINGS = $14,768
  1. Renting his personal residence to his business without paying income tax on it.  The Augusta Rule, allows homeowners to rent out their home for up to 14 days per year without needing to report the rental income on their individual tax return. By renting his home to his business for various business-related purposes (and documenting them), he was able to implement an easy strategy that allowed him to further increase his savings.
    • ANNUAL SAVINGS = $570
  1. Hidden Business Deductions. We reviewed his personal expenses and were able to identify and recategorize some of them (such as mileage and home office costs) as business deductions. 
    • ANNUAL SAVINGS = $10,400

The Results

Annual Savings$82,549
5-year tax savings$412,745
ROI in the Tax Plan design128.57%