Hey Smarter Vets! CJ Burnett here and today I’m going to give you the best tax advice I ever got I’ll never forget the first time I heard an accountant tell me in order to save some tax I needed to spend more money – my initial reaction was, I’m sorry, what?
Like, he wanted me to spend money in my business, to deduct from my income so I could save money in taxes. And what that looked like, because I literally was, I translated what he was saying in the numbers and I couldn’t understand what I was actually hearing. Like I literally couldn’t believe it. And what he was saying, so let me put this in numerical form, as far as what was going on in my head.
He was saying I needed to go spend, say, let’s pick a number, $100,000 in my business in order to reduce my taxable income by $100,000 so then I could save the taxes that I would owe on the $100,000, let’s call it 40 grand, in taxes. So I had to spend $100 to get $40,000 back. And I remember him doing the calculations for me and he’s like, well, now you have the money in your business. I’m like, yeah, but I’m spending money that I don’t have to spend.
If I already needed that whatever x-ray machine, whatever it is that I’m going to be buying, if I already needed that, fine. I think that would make sense. Like if I’m going to buy it in February, I might as well buy it in December, get the tax deduction in December for that tax year because everything’s done on a calendar year unless you’re in a very specific circumstance. And then like that way I have the thing that I would have, I would normally have in February, I’m just going to have it in December. That makes sense to me.
But he was literally saying to spend money on things that I don’t actually need in order to save the $40,000 in taxes. And I said, well, hold on. If I just take the $100,000 in income and pay the $40,000, then I can take $60,000 for myself. Like, I can put that somewhere else on my personal balance sheet, or I could potentially do something. I could buy a car. I could pay off my mortgage. I could pay off the student loans.
I could pay for more insurance that I’ve been looking to get. I mean, there’s so many different, like I knew so much money was $60,000. I knew so many things. So the best tax advice was this. Because it wasn’t given by this guy. It was actually given by another accountant who was a friend of mine, because I remember walking away from that meeting thinking like, this can’t be real. Like this guy cannot be serious. Like he’s just telling me to spend money. And I went to a friend of mine, another friend of mine who was an accountant, and I said, this is what this person is telling me.
And then he followed up with a bunch of other questions, because there’s actually some scenarios in which you could actually do that and end up better off. But in this particular scenario, it wasn’t. And this guy said to me, here’s the best tax advice I ever got. He said, CJ, at the end of the day, sometimes we don’t want to let the tax tail wag the dog. Now, you guys are vets. I thought it was hysterical that this CPA was talking to a financial advisor and he used an animal analogy to describe this.
If you’re a veterinarian out there, you own a practice and you have a CPA that tells you every year that you need to spend a bunch of money in order to save some money, maybe perhaps sit down with them, have them do the calculations with you to ensure that if you’re spending the money that you’re actually getting value for that money. That money that’s being reinvested in the business is going to earn some sort of rate of return and you’re not just throwing money at something in order to save a few pennies while spending dollars on the back.
Video Summary:
As a business owner, you’ve probably heard this advice: “Spend more before year-end to save on taxes.” But does that strategy actually make financial sense? In many cases, the answer is no.
One veterinarian was told to spend $100,000 on business expenses to save $40,000 in taxes. The result? A $60,000 loss of personal income. While accelerating necessary purchases can be a smart move, spending just for a deduction is often a costly mistake.
The best tax advice we’ve heard came from an accountant who said, “Don’t let the tax tail wag the dog.” In other words, your financial decisions should be driven by long-term strategy—not short-term tax savings.
Veterinary practice owners should always ask: Does this reinvestment provide real value and a return? If not, it may be time to rethink your approach. Smart planning aligns your tax strategy with your goals—not the other way around.
This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Tom is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Florida Veterinary Advisors and The Next Step Planning Group are not an affiliate or subsidiary of PAS or Guardian. California Insurance License #0K80141. AR Insurance License #15823672. Florida Veterinary Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. The individuals associated with Florida Veterinary Advisors do not maintain specialized licenses or qualifications for the financial services provided to veterinary professionals. 7989827.1 Exp 5/27