As a business owner, when you look at your tax bill and find a high payable amount, you wish you could save some of it. And to your surprise, you could actually save some of that money.
There can be multiple ways, but here are the top 8 ways to help you save tax and utilize that money to upscale your business.
Use Tax Credits to your Advantage:
The federal government offers multiple credit schemes to encourage business owners. You can take benefits of credits against hiring employees, issuing health coverage to your staff, supporting disabled employees, causing social welfare, and even your initiatives to keep your city clean and green.
Depreciation Can be Used to Get Deductions:
With accelerated depreciation laws such as Section 179 deductions and bonus depreciation, you can avail of deductions on buying new assets along with some extra benefits. The assets may constitute any major machinery or enterprise solutions that undergo depreciation over the years.
Stay Updated with Tax Laws:
Check on the recent developments and changes in tax laws that could be used to your benefit. Consult some tax planning consulting services to confirm your eligibility as these can help you lower your final tax bills. There are continuous amendments regarding the various tax break and credit laws to help business owners, especially for small-scale and startups.
Startup and Capital Amount can Save you a Lot:
Setting up a new business unit needs several initial costs. The IRS provides certain guidelines to help business owners with tax breaks against these capital expenses, which may include equipment costs, procuring supplies, and other operations charges. These deductions can lower your net taxable income.
Get Rid of Bad Debts:
At the end of a financial year, you might come across several customers who owe you a certain amount of payments. If it’s certain that you are not going to receive the payments in the near future, better mark them as “bad debts” and write them off your books to reduce your business income.
Deductions Under Investments And Insurance:
A smart investment can not only help you with more income but also deducts some of your tax amounts. Added to that, the premiums paid for your employees’ life insurance plans can also contribute towards tax savings, provided it isn’t benefiting the business owner.
Retirement Contributions:
Opting for some retirement plans not only keeps your old age safe and secure but also plays a beneficial role in tax saving. As a resident of the U.S.A., you can save up to $5,500 with tax exemptions and contribute to the IRA (Individual Retirement Agreement).
This limit may vary as per your age or several other deciding factors. You can opt for several other IRS-qualified retirement accounts and plans to get some extra tax deductions on your savings.
Loss Deductions:
Business losses can be utilized to get some extra tax deductions. Whether you are a part of an S corporation, partnership, LLC, or even sole proprietorship, there are options that can be used in your interest. A proper consultation is advisable to avoid any setbacks.
Besides these tips, you can follow some general tax-saving guidelines such as paying advance taxes, avoiding late fees, timing your business expenses, and some charitable donation, to help you reduce your taxable income and help you save more on taxes.
With so many options out there, it totally depends on your eligibility and circumstances. Learn how to prepare business taxes and do not wait for the year-end, start tax planning now. Every minor step counts towards tax saving, and the more you save, the more you earn.