Running a small business is a stressful task as there are several things that you need to juggle to keep it afloat. Taxes are a critical concern for any entrepreneur because parting from your hard-earned income isn’t the easiest thing to do. At the same time, this is not something you can avoid. Evasion and even inadvertent mistakes with taxes can land your company in deep trouble. Fortunately, some smart measures can help you in reducing your tax bills. Here are some easy and reliable tactics you can rely on for reducing the taxable income for your business this year.
Being a small business owner deprives you of the benefit of having an employer bearing a part of your tax burden. Moving to a Limited Liability Company (LLC) structure is a good idea as you will have to bear only half of the tax responsibilities. With this structure, owner and business are treated as two different entities from the tax perspective. This could end up reducing your tax responsibility to a significant extent. Seek advice from your tax consultant and make the switch this year if it helps.
Another smart move to save up on taxes is by starting a retirement plan, which is something that you miss out on as a professional. The measure has dual benefits as you will have savings as well as reap valuable tax benefits for your organization. There are several retirement account options you can explore, such as an IRA, Simplified Employee Pension Plan, or 403(b) plans.
The IRS allows myriad options for sheltering your income, provided that you use them legitimately. You can check https://creativetax.io/ to explore these options and get some good advice from experts. Hiring a family member can be a wise move to considerably reduce the tax bill in your business. You can even engage your children and eliminate the taxes on the income you pay to them. For example, sole proprietorships need not pay Medicare taxes and social security and on the wages of a child. Just ensure that you can validate the earnings coming from justifiable business purposes.
If you want to reduce the tax liability for your small business, saving money for healthcare needs is another great idea. It covers your unexpected or future healthcare needs while bringing down tax value as well. You can utilize a Health Savings Account (HSA) for this purpose. The tactic delivers three-fold benefits; the contributions are pre-tax and grow tax-free. At the same time, the withdrawals for valid medical expenses are tax-free.
Business owners who travel frequently can leverage travel expenses to reduce the tax bills. Since business travel is deductible, you can easily use it for cutting down the taxable income value, and the tax amount comes down correspondingly. You can maximize the business travel expenses by combining personal travel with a legitimate and justifiable business purpose.
Wise planning can go a long way in reducing your taxable income and keep more of your money in your hands. You can go the extra mile by consulting a tax professional who can help you maximize your potential savings.