First, let’s celebrate the fact that you are asking these questions… that means your business is making money or you have worked hard and need some compensation! Both are a big deal.
Remember to be realistic about your lifestyle when deciding when, how much, and how you will be paid. You have to put on the oxygen mask to take care of your life before you can do that for your business. If your business has a healthy bank account and has a steady projected income, it’s time for you to take a salary.
Keep reading to learn my payday confidence boosters!
You work hard. You are worth it. You are a business asset.
If you were to hire someone to do what you are currently doing in your business, how much would they expect to be paid? You shouldn’t be paid any less than them. That salary number should be a part of your monthly business budget. When deciding how much to be paid, consider the VALUE you bring to your business, not just the hours worked- just like you would if you were hiring someone.
You get tax benefits when you pay yourself a salary.
Once you have a set payment amount taken out of your business account on a regular basis (ex. every 2 weeks), you will soon enjoy some tax savings! Because money is going out of your account, the business won’t pay taxes on your salary. Ex. your business income was $200,000. You took a salary of $90,000. Your business will only be taxed on $110,000 of the total $200,000 income for that year AND you can submit that $90,000 as a payroll expense.
Pro Tips 💡
-Look into contributing to your retirement as an additional way to pay yourself now for future needs! I covered the best way to do this in last week’s email. If you haven’t read my retirement tips, check them out here.
-Making more money and working more? Don’t forget business owners need raises too.
-Biggest tip: consult a tax professional for your specific circumstances. Investing in a proactive CPA is where the big savings can be found year after year.
The Tax Chick has you covered! Hit reply if you have more questions about whether to pay yourself, how, and when.
Cheers to ample paydays!
Chika
8 Easy & Effective Tax Write-Offs for Creatives & Service Providers
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