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Comment by kg | Hacker News Reader

> Defer US taxes by reinvesting your taxable income into the economy as business expenses, depreciating assets, etc.

Be really careful when doing this. Make sure you have a great accountant - if you go more than a few years without turning a measurable profit, your risk of being audited apparently goes up. My accountant personally cautioned me about this since my business has been in an R&D phase for 5 years so we've been showing a small loss every year. The last thing you want is for the IRS to decide you've been cheating on your taxes.

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This is true for most businesses (they will reclassify it as a "hobby" where expenses aren't deductible, though you can fight that in tax court or real court if you want to) - but for rental properties you can go for decades with no profits (because of depreciation).

Can you elaborate? As a business owner in the U.S. I can opt to reinvest all revenue back into the business, thus would show zero net profit but (presumably) increase my company’s value. (And remember there are other taxes and fees paid to various governments, not just tax on income/profit, so it’s not typically like nothing gets paid.)

https://www.irs.gov/newsroom/know-the-difference-between-a-h...

You can't reclassify profit as reinvestment to show zero net profit. (If you could every business would have an internal hedge fund or private equity business and would show zero net profit).

>As a business owner in the U.S. I can opt to reinvest all revenue back into the business,

Not entirely, no. Any of those reinvestments that count as capital expenditures aren't immediately deductible, but only on a throttled schedule, which is why the concept of depreciation exists in tax law:

https://news.ycombinator.com/item?id=15061439

I think I said that?

> … it’s not typically like no taxes get paid.

This is why I asked for elaboration: The poster was unclear about how, say, making capital improvements (and getting taxed on those over time) would somehow look suspicious to the IRS, as it seems like this is an extremely common practice. I assume it’s not that then, but something else which I’d love for the poster to share.

Your comment made it sound like any re-investment back into the business would count as a cost that then cancels the profits that would be taxed. Even with your clarification, it still sounds like that. This is orthogonal to taxes that would be levied on things other than profit.

As a business owner, if you provide labor to the business, you have to pay yourself a salary.

This is why many people make minimun wage - they get a salary but they use the business profits to live on. See your accountant for all the fine print before doing this.

The point is creating failed businesses is legal and tax deductible.

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