As a small business owner, taxes are one of the most significant expenses you’ll have to deal with each year.
While it may be unavoidable, there are several strategies you can employ to reduce your tax bill and save money. Let’s look at some of the most effective and clever ones.
Take Advantage of Tax Deductions
A tax deduction is an expense that can be deducted from your taxable income, reducing the amount of income subject to taxation.
For example, if you spend money on advertising or travel for business, you can deduct those expenses from your taxable income.
Keep careful and detailed records so you can take advantage of all the tax deductions available to small businesses and maximize them to minimize your tax bill. This may be the most important thing you can do. You may be surprised how much your deductions add up to at the end of every year.
By keeping detailed records, you won’t ever have to guess or forget important information that may save you money.
Utilize Retirement Accounts
Another way to reduce your taxable income is by contributing to a retirement account such as an IRA or 401(k).
These accounts allow you to set aside pre-tax dollars for retirement while reducing your current taxable income. This means that while you’re saving for retirement, you’ll also have less money subjected to taxation in the present.
Depending on the type of account and plan you choose, there will be limits on how much money you can contribute each year. However, even small contributions can lead to significant savings over time.
Take Advantage of Tax Credits
A tax credit is an amount of money subtracted directly from the total amount of taxes due.
Unlike deductions which reduce taxable income before taxes are calculated, credits reduce taxes after they have been calculated.
Many tax credits are available for small business owners, including credits for research and development costs, energy efficiency improvements in buildings or equipment owned by the company, hiring employees from certain disadvantaged groups, and more.
Make sure to research all available credits, so you can take advantage of all opportunities to save money.
Pay for Health Insurance
Health insurance costs can be an enormous burden, and it’s even more difficult if you’re self-employed or don’t have an employer-sponsored plan.
Fortunately, the IRS offers many advantages for those who are their own boss and pay for their insurance. With these benefits, self-employed workers can save substantial money that would otherwise go toward paying taxes.
For example, if you are self-employed and pay for your health insurance, you can take advantage of the Self-Employed Health Insurance Deduction.
This means that all premiums—including coverage for yourself, your spouse, and your dependents—are eligible for a tax deduction. Additionally, certain medical expenses may be tax-deductible as well.
Contact AA Tax and Accounting Services for Consultation
Many individuals and small businesses are looking for ways to reduce their taxes legally, but navigating the complex US tax code can quickly become daunting. This is where AA Tax and Accounting Services come in.
We provide full-service consultation to individual taxpayers and small businesses to help lower their taxable income and thus reduce their tax bills.
To start the process, we’ll review your last two years of financial statements, including any existing investments or deductions available that can help optimize your tax situation.
We can suggest strategies such as deferring income or shifting assets to take advantage of current laws and develop creative solutions tailored specifically to your needs.
We also keep up with changing regulations, identifying new options for reducing liabilities or optimizing deductions. Contact AA Tax and Accounting Services today for an initial consultation if you want professional assistance in reducing your tax bill.
Our team of experienced accountants will work with you every step of the way to ensure that you save money this season — and many more in the future.
Conclusion
Reducing your tax bill as a small business owner doesn’t have to be complicated or stressful—with some strategic planning and savvy maneuvering, it’s possible to significantly lower your taxes without breaking any laws.
Taking advantage of deductions, utilizing retirement accounts wisely, and taking advantage of applicable tax credits are just a few ways you can do this responsibly and effectively. Spend some time researching every tactic to get the most out of every dollar spent on taxes. You’ll be glad that you took the time when filing season rolls around! And don’t forget to let AA Tax and Accounting help.
