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If you run a small company, this means you’ll need to wear multiple hats. You are likely more focused on running your operation than optimizing your tax efficiency. However, what may surprise you is there are several options available that can help in lowering your tax bill. This is thanks to tax deductions. The money you do save can be put back into your brand.
To potentially save a ton of cash, here are some great ways small business heads can lower their tax bill.
A brilliant way to lower taxes for your small business is by hiring a family member. The IRS (Internal Revenue Service) allows for a variety of options. Any of them brings the potential advantage of sheltering income from taxes. There’s even the possibility to hire your own children! If you hire a family member, you pay a lower marginal rate or eliminate the tax on income paid to your children. For example, sole proprietorships don’t need to pay medical taxes or social security on the wages of a child. However, to qualify, you will need to point out your earnings come from legitimate business purposes.
We’re all aware of how expensive health insurance can be. Thankfully, the IRS has special benefits for self-employed people who pay for their own insurance. Those who work for themselves and pay their own health insurance may have the option to lower their tax bill. It’s also encouraged for every business owner to explore utilizing a HAS (Health Savings Account). This lets you put aside cash on a pre-tax basis to pay for qualified medical expenses.
Depending on the type of business you run, you may need to drive as part of your work. Should you opt to purchase a company vehicle, this could result in lower taxes through deductions the IRS has set aside for small companies. For those who have a car they could do rid of, you can reduce your tax bill using car donation. Car Donation Centers explain how this works in further detail.
Small business heads are required to give up a 401(k) matched by an employer. Although, there are numerous retirement account options you can look into. These can elevate retirement savings and you’re able to reap valuable tax benefits. For instance, with the one-participant 401(k) plan, the IRS enables you to set aside up to $57,000 in total contributions for retirement.
Small business owners don’t have the luxury of an employer paying a portion of their taxes. Instead, you will be accountable for the entire amount of Medicare and Social Security taxes. If your company is taxed as an LLC (limited liability company), you’re still ordered to pay such taxes. However, in certain instances, you may have the option to eliminate the employer-half of those two tax responsibilities.
For any small business owner, taxes can bring a whole load of stress. We appreciate the last thing you want is to give more of your hard-earned business income to the government. As long as you use the right tax-saving strategies like those above, you could end up keeping hold onto more money than you think!
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