Are you looking to minimise tax liabilities for your business? Every year, small business owners are looking for the most efficient and effective ways to lower their tax burden and help their business thrive. We’ve put together a small list of some of our most recommended tips, so keep on reading!
What Kind of Expenses Can My Business Claim?
Before exploring our 8 tips, here are some general business expenses that Small Business owners can deduct from their taxes [1]
Startup Costs
The Internal Revenue Service often requires you to deduct major expenses over time as capital expenses rather than all at once. You can reduce up to $5,000 in business startup costs in the first year of active trade or business.
Rent Amount deduction
Are you renting out office space? If yes, you can deduct the amount you pay for rent. Along with office space, you can also apply the same rule for equipment.
Interest
The primary benefit of tax relief is that your interest on a business loan from a bank is tax-deductible. Your business portion of every loan is almost always tax-deductible.
Internet and Phone Bills
You can always deduct your phone, fax, and internet expenses but only the business portion. For example, you can deduct the internet-related costs of running a website for your business.
Education
When it comes to education you have the freedom to deduct all education expenses related to improving your skills for your existing business.
Tax-Saving Tips for Small Business Owners
1) Business Deductions Are Critical for Tax Savings
All necessary costs in running a business can be deducted from one’s income. This reduces the amount of business tax. Your business expenses are generally deductible if the following two conditions are met:
The expenses are ordinary and necessary
You kept the records that the Internal Revenue Service requires to support your claims
2) Pay Your Retirement Accounts First
If you are a small business owner, you can also benefit from the Traditional IRA. The IRA can be combined with retirement plans thereby contributing to tax deduction.
Making contributions to your retirement accounts will reduce your taxable income, but do not forget to get advice from your financial planner. [2]
3) Consider when to pay back payroll taxes
Hire a reputable company to assist with payroll taxes. The IRS typically checks every quarter to see if payroll taxes have been paid, so it is important that this is done properly.
4) Don’t Overlook Carryovers
Certain deductions can reduce taxable income. Always keep track of carryovers so that you won’t forget to use them in future years. They include Capital losses, Charitable contribution deductions, General business credits, Home office deduction and Net operating losses. [3]
5) Check With a Qualified Tax Advisor
Consulting a tax professional before making any decisions can affect your business tax debt relief. Make sure you select someone who can help you all year round and not just at tax time. Consider hiring an expert who can represent you before the IRS in case you’re ever audited.[4]
6) Take Tax Credits to Lower Your Business Income
Your accountants advice will certainly have a great impact when it comes to lowering business income by taking tax credits. It is the federal government’s way of encouraging businesses and individuals to do or not do things. Tax credits are often part of the General Business Credit, which is quite extensive so you may qualify under some of its terms.
7) Year-End Planning
You can use several tax relief services and the most important one is to follow some strategies and lower your taxable income just before the end of the year.
Delay billing for unpaid work until payment is received in the following year.
Purchase fixed assets and claim immediate depreciation.
Write off bad debt.
Submit your taxes on time.
Conclusion
Running a small business is hard but fortunately, you can reduce the amount of taxes by taking advantage of breaks and opportunities. Discover new ways to lower taxes for your small business. Explore your options and stay focused. Your strategies can save you a significant amount this year and in the future.
