5 Top Secrets To Reduce Your Small Business Taxes
Reducing small business taxes is one of the biggest goals of a business owner. Small businesses in particular can often be burdened by high taxes, which can eat into your profits and make it difficult to grow your business.
There are a number of ways to reduce small business taxes, and it’s worth exploring all of them to see what will work best for your business.
How to reduce your taxes
Taxes are a big part of any business and if you don’t pay the right amount of taxes than there is a good chance that you will be in trouble with the authorities. So it is always good to know how to reduce your taxes and make sure that you pay only what you need to pay.
Hire a family member
One of the easiest strategies to decrease your small business’s tax burden is to hire a family member. By hiring a family member, you can take advantage of a number of tax breaks that are available to businesses that employ family members.
For example, you may be eligible for a reduced rate of payroll tax on your family member’s wages. You may also be able to claim a deduction for the cost of health insurance premiums paid for your family member. Hiring a relative can also help you reduce your taxes in other ways, such as by allowing you to take advantage of the earned income tax credit.
Deduct your business travel expenses
If you have to travel for business purposes, you can deduct your travel expenses from your business taxes. This includes airfare, hotel stays, car rentals, and other related expenses.
Keep track of your expenses and save your receipts so that you can deduct them when you file your taxes. This can help you save money on your taxes and improve your bottom line.
Establish a retirement plan
There are several retirement account options that can help reduce your business’ taxable income and maximize retirement savings. These include 401(k) plans, 403(b) plans, and 457 plans. Each of these has different contribution limits and tax benefits, so it is important to compare them and choose the one that best meets your needs.
For example, a 401(k) plan allows you to contribute up to $18,500 per year (or $24,500 if you’re age 50 or older), and the contributions are tax-deferred. This means you won’t pay taxes on the money you contribute until you withdraw it in retirement.
A 403(b) plan has similar tax benefits, but the contribution limits are lower. And a 457 plan allows you to contribute after-tax dollars, but the contributions are not taxed when you withdraw them in retirement.
Set aside money for healthcare needs
One of the easiest methods for small businesses to lower their tax burden is by setting aside funds for healthcare expenses. This can be done by setting up a healthcare reimbursement account, which can be used to reimburse employees for medical expenses.
This account can be used to reimburse employees for a wide variety of medical expenses, including doctor’s visits, prescription drugs, and even dental care.
By setting up this account, small businesses can save money on their taxes, while still providing their employees with the healthcare coverage they need.
Keep track of business losses
Monitoring your losses is a good way to reduce the amount of taxes you owe each year.
The IRS allows businesses to deduct certain types of losses from their taxes. Keeping track of these losses can help reduce your tax burden. Common deductible losses include inventory losses, bad debts, and casualty losses.
To deduct a loss, you must be able to show that the loss is directly related to your business. For example, if you have a retail business and suffer a theft, you can deduct the value of the stolen merchandise from your taxes.
Conclusion
If you are a small business owner, you know how important it is to reduce your small business taxes. It is tempting to just skip these steps, but it is important that you do not. If you do, you could be missing out on a lot of money that you could be saving for yourself and your family.