7 Ways to Reduce Taxes for Business Owners
One of the most annoying parts about working is taxes. When you look at your paycheck, there’s always that feeling of knowing money is missing. Then, every April, the IRS wants people to file their taxes, which results in a refund or owed money.
For business owners, managing personal and business taxes can cause a lot of stress. Business taxes are already complicated, and it doesn’t help that you have to pay for a CPA to look over them.
Lucky for you, there are ways to reduce taxes your business has to pay. To save time and money, keep reading for some tax advice for your business.
1. Save for Retirement
Putting money away for retirement can help you now and in the future. Small business owners can benefit from different types of retirement plans.
Contributions you make to your retirement account may count as a deductible on your personal taxes. Your business’ contributions towards your retirement plan can also count as a deductible business expense.
When you offer a retirement plan for your employees, you may have eligibility for up to $500 in business tax credits a year. These tax credits are available for up to three years and can help offset administrative and educational expenses.
2. Reduce Taxes Through the Qualified Business Income Deduction
The QBI is a business deduction introduced by The Tax Cuts and Jobs Act in 2018. You may be able to deduct 20% from your business income if it is a pass-through entity. First, that means your business must be a sole proprietorship, an S corporation, or a partnership.
The second qualifier is that your business must pass income and deductions down to shareholders, partners, or owners, who report these on their personal taxes.
There are restrictions and limitations, so seek CPA advice.
3. Claim 100% First-Year Bonus Depreciation on Late-Breaking Asset Additions
Another benefit of the TCJA is 100% first-year depreciation for new and used property placed into service this year. Your business may be able to write off the partial or entire cost of property acquired the same year.
4. Employ One of Your Kids
Hiring one of your children as an employee can provide several benefits. Their salary can count as a business expense that lowers the business’ income. This can reduce your business and personal taxes.
Their income can make them eligible for a traditional or ROTH IRA.
Third, the first $12,000 of your kid’s income each year may be income tax-free.
There are rules to abide by, however. For example, your child must make a real contribution towards your business. You can connect with someone at WealthAbility to find out more.
5. Take Tax Credits
Tax credits are things businesses can do or not do for the greater good. Some of these initiatives include going green, hiring employees, providing resources for the disabled, and health benefits for employees.
Many of these initiatives fall under the General Business Credit, so you can check with of these qualifications you meet.
6. First-Year Depreciation Bonus for Qualified Improvement Property
100% bonus depreciation also applies to commercial real estate QIP enacted this year. QIP is an improvement to the interior of a business after the building of a piece of commercial real estate. QIP does not include expenses for building enlargement, elevators, and escalators, or for internal structural framework.
7. Ask a Tax Professional for Recommendations
CPAs and accountants are your quintessential resources for tax season and financial planning. They know of ways to help reduce business expenses and get you tax write-offs. They can also assist you with your bookkeeping.
If you don’t want to do this, you should have them look over your books twice a year. Tax laws change and new opportunities to save money may arise.
Your Business Resource
Saving money always leaves a good feeling. Businesses have sizable expenses, and you should always take advantage of ways to save money. There are numerous ways to reduce taxes on your business and you should seek CPA advice to save the maximum amount.
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