While taxes can be a nightmare for everyone, there are a few strategies small business owners can adopt to make the process a little less troublesome, and what’s even better: they can actually save you money.
Check out the following 10 tax strategies and see if with a tax professionals help, they can save you money and relieve some of the pressure tax season typically induces:
- Take your QBI
The Tax and Jobs Act created the Qualified Business Income (QBI) deduction back in 2018, allowing you to deduct 20% from your taxable income if your business is structured as a “pass-through” entity (where the business income is treated as the personal income of the owners). This is applicable for Sole Proprietorships, S Corps and Partnerships; check with a tax professional to determine your eligibility.
- Set up a qualified retirement plan
Qualified retirement plans for you and/or your employees, can help you prepare for the future and save money on your business taxes. Tax-deferred plans like IRAs, 401(k)s, or 403(b)s enable you to hold off on paying taxes on those contributions until you withdraw them later.
- Avail applicable tax credits
Business Tax Credits can help you save money, and some that you may be able to take advantage of, are listed below:
- Employee retention
- Sick leave/family leave
- ADA accommodations
- Energy saving
- Hiring from certain categories
- Track expenses
Tracking your expenses allows you to monitor spending more closely, find errors and take advantage of deductions at tax time. Keeping good records of what you spend your money on, will help you justify any deductions you claim on your taxes.
- Deduct Equipment and Vehicle Purchases
For purchases made that are beyond those related to the regular operation of your company, such as new equipment or company vehicles, under Section 179 of the U.S. Tax Code, small and medium-sized businesses can deduct significant portions of large expenses.
- Make donations
Upgrading certain items, such as office furniture and equipment, can give you tax deductions should you choose to donate them to a charitable organization.
- Give gifts
If you’ve given gifts to customers and vendors, you’re able to deduct as much as 25% of their cost on your tax return.
- Write off old business debts
Save money by writing off bad debts on your taxes, if you’re not a cash basis taxpayer.
- Use losses to help save you money
Many small businesses operate at a loss in their first few years of trading, but you might be able to use those losses as a net operating loss (NOL) deduction on future income once you start making a profit.
- Pay more in benefits
Rather than giving your employees a raise, consider contributing more towards their premiums if you have an employer-sponsored healthcare plan in place for them. With you paying less in employment taxes, and them having less taken out of their checks for healthcare, it can be advantageous for both parties.
While some or all of these tax saving strategies might apply to you as a small business owner, it’s always best to check with a tax professional; and who knows, they might come up with even more great ways for you to save money and sail through tax season!