Article Updated October 24, 2023.
Is that daily dose of caffeine really breaking the bank? The way I see it, your $5-a-day latte isn’t nearly as damaging to your finances as you might think.
Let’s get into it.
There are far more significant financial matters to consider, especially when it comes to your small business. The truth is, learning a few well-kept tax secrets can have a far more substantial impact on your bottom line.
You see, the IRS may seem intimidating, but the world of tax deductions and credits is filled with opportunities for small business owners.
Explore these five ways to start saving cash money on taxes NOW:
1. Employ a family member
Did you know that by hiring family members, small business owners can pay lower rates on taxes or even eliminate the tax on the income paid to their children?
So, hire your 16-year-old daughter as your data entry assistant. We both know she’s been spending far too much time scrolling social media anyway.
Hiring a family member isn’t just about giving your nephew a summer job; it’s a legitimate tax-saving strategy. The tax benefits can be substantial, and they extend to your family members as well.
By employing your family in your business, you can shift income from your higher tax bracket to their lower one, effectively reducing your overall tax liability.
Just make sure the work they do is legitimate work for your business and paid at a reasonable rate.
2. Utilize Tax Credits
Did you know your business can get tax breaks for “doing good”? You can get tax credits for things like going green, making your spaces accessible for disabled community members, and providing health insurance for your employees, just to name a few!
Unlike a tax deduction, tax credits reduce your tax liability dollar for dollar.
Which means tax savings can add up exponentially. Being a socially responsible business can pay off in more ways than one.
Several tax credits are available to businesses that engage in activities that benefit the community and the environment.
- For instance, the Small Business Health Care Tax Credit is available to small employers who provide health insurance to their employees.
- Additionally, if you’ve made your business more accessible to people with disabilities, you might qualify for the Disabled Access Credit.
Going green can also earn you tax credits through various energy-efficient initiatives. These credits can significantly reduce your tax burden, so explore the options that align with your business’s values.
3. Start a retirement plan
Owning your own business means you do not have the 401k luxuries you would if you were a W2 employee. A retirement plan only works in your favor when you make contributions to it.
There are lots of tax-deductible retirement plan options for small business owners. A traditional IRA or SEP IRA are two different retirement plans that can offer immediate tax-saving benefits.
Contributions to these plans are tax-deductible, meaning you can reduce your taxable income today while saving for your retirement in the future. Click here to learn more about doing retirement right.
While a 401(k) might not be an option for small business owners, there are tax-advantaged retirement plans designed specifically for the self-employed.
If opening an account online sounds daunting, talk to your CPA, or consult with a Financial Advisor.
4. Deduct as much as you can! But do it accurately.
When running your own business (especially, if it’s out of your home), it can be difficult to distinguish personal expenses from business expenses.
The point is, you need to keep track of everything you buy! Things like supplies, travel expenses, and electronics can all be deducted. As long as the purchase is business-related and deemed reasonable for the business, then you want to capture it as a tax write-off.
Ain’t no sense in doing business if you are paying more taxes than you should.
Maintaining a clear distinction between personal and business expenses is essential. Keeping meticulous records of your expenses can help you maximize your deductions.
Everything from office supplies, business-related travel, and even a portion of your home expenses if you work from home can be eligible for a write-off. Just ensure that you’re following the tax law, and consult a tax professional to get it right.
5. Consult with a tax advisor
Taxes are confusing. Not to mention, complex. Running your own business is hard enough. Don’t complicate things. Talk to someone who knows what’s up.
Tax advisors can be hefty investment. BUT, they will save you money you never knew was there.
A tax advisor can provide you with a tax strategy plan customized to your business so you know exactly what to implement throughout the year to maximize your tax savings. Often times, the savings I get for my clients far exceed the fees they pay to secure my services.
In other words, the return on investment is in your favor.
Navigating the complex landscape of small business taxes can be overwhelming. Tax laws change on the spur, and it’s easy to miss out on potential tax deductions and credits.
Don’t Leave Money on the Table
It’s high time you stop worrying about that daily coffee and start focusing on the substantial savings your small business can achieve through smart tax planning.
Implementing these tax-saving strategies, from employing family members to exploring tax credits and deductions, can make a significant difference in your annual tax bill.
Don’t hesitate to consult with a tax advisor who can provide you with expert guidance and help you navigate the ever-changing tax landscape.
Your latte might bring you a temporary pick-me-up, but these tax-saving tips will have a lasting impact on your small business’s financial health.
Let me do the work for you –
If you are a creative online service provider who clocks in multi 6 or 7-figure annual revenue, you want a CPA who offers proactive tax strategy planning in addition to tax preparation.
Building a relationship with your CPA is the key to maximizing your savings. Prioritizing the relationship is how my team and I save clients, on average, over $60,000 in taxes annually. If this sounds like something you are interested in, let’s talk! Tell me about you, and let’s chat!
Disclaimer: This email is for educational and conversational purposes only. Emails, blog posts and social content from Obih Collective Inc. are not legal tax advice. Please consult a tax professional before making any tax decisions based on this information.