Small business owners can lower their taxable income a number of ways.
Several deductions and tax-advantaged savings accounts can help with this.
Learn how to reduce your taxable income as a small business owner with these 3 useful tips below!
As Benjamin Franklin famously observed: nothing is certain but death and taxes.
For small business owners, the added burden of taxes, along with payroll, utilities, and other expenses, can certainly be a pain. The good news is that there’s many strategies to lower your small business’ tax bill surprisingly easily.
Interested in learning more? Take a look below for more information!
Save for Retirement and Healthcare
Saving for retirement and for healthcare as a small business owner can be tough, but fortunately, there are several tools to use to not only do just that, but also reduce your taxable income.
A solo 401(k), for example, allows small business owners to sock up to $57,000 away for retirement lowering your taxable income. Other retirement savings accounts to consider using include traditional and Roth IRAs, 403(b) plans, and Simplified Employee Pension (SEP) plans.
Likewise, another tax-advantaged savings account to seriously consider is the Health Savings Account (HSA) plan, which allows small business owners to not only make pre-tax contributions that grow tax-free, but withdraw their funds tax-free for qualifying healthcare expenses.
Consider Changing Your Business Structure
Your business structure can have major implications for your tax liability.
For example, if your business is classified as a limited liability company (LLC), you have to pay both the employer and employee portion of payroll taxes for Medicare and Social Security, though in certain circumstances, you may be able eliminate the employer portion of these taxes. Consult with your accountant and financial advisor on how best to optimize your tax liability by changing your business structure.
Look for Travel Expense Deductions
Did you know that business travel is considered a fully-deductible expense? It’s true!
Although personal travel isn’t deductible, consider combining it with legitimate business travel in order to maximize your tax deduction. Plus, frequent flyer miles from business travel can be redeemed for personal travel at a later date.
Lower Your Small Business Tax Bill Today!
No small business owner likes paying taxes. Fortunately, by simply using these tips, you can reduce your taxable income and effectively lower your tax bill. Keep them in mind the next time April 15th rolls around!