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+1-802-778-9005Managing business taxes is important, but efficient tax management will reduce or maximize the amount that can be used to finance the expansion of your business.
Dealing with the new provisions of federal tax laws adopted in 2017 regarding individual deductions means that small business owners can still use several tax incentives.
A single mistake can hike up your tax bill, but smart tax-saving decisions can help in deducting your taxes, so prepare for tax returns as well.
Knowing the right things to do, you can get additional deductions, lower your tax bill, and increase your business’s profitability.
Here are seven powerful tips that will assist your business in avoiding unnecessary taxes effectively.
You can benefit from common tax rules, which can give your business a good sum of money.
A SEP IRA, Solo 401(k), or SIMPLE IRA allows you to contribute funds, which can help you lower your taxable income. Deductions towards these plans may be tax-exempt, thus reducing your AGI. It helps slash the income subject to tax by decreasing your adjusted gross income.
Benefits:
Example:
A Solo 401(k) plan allows a sole proprietor or business owner with no more than 100 employees to contribute up to $66,000 for 2024. For instance, assuming you make $100,000 in net business income, contributing $20,000 to your retirement plan will also reduce your taxable income by $20,000, which could otherwise cost you hundreds or more in taxes.
Deferred Taxable Income means that you get to postpone receiving income that is otherwise taxable in the current year, and this lowers the taxes you pay currently. This is especially so when your income in the succeeding years will be lower than the current tax year, which places you in a lower tax bracket.
Benefits:
Example:
If you own a corporation, you can delay other compensation by taking small salaries and then distributing the profits as dividends. For instance, if your usual income is $50,000 and you decide to “take” some income in a future year, you can distribute part of the business profits as dividends, and the taxes will be charged in the other year.
Depreciation helps you to allocate the cost of assets such as equipment, vehicles, or property over time. This will form part of your tax reliefs since it enables you to minimize your taxable income due to the fact that you have offset it with the cumulative cost of those items that you buy periodically.
Benefits:
Example:
Let us assume that you bought new equipment for $10,000. Then, you will be able to deduct this cost each year through the depreciation schedule. For instance, with the prescribed 5-year depreciation method, you may claim $2,000 per year and adjust your taxable income by as much as $2,000 for the next five years.
Employing a tax professional means that one’s claim is optimized and one adheres to the tax laws as they change constantly. An advisor in the tax field can advise on certain deductions and credits relevant to your business type.
Benefits:
Example:
A tax advisor will be able to point out some deductions, like home office deductions or business meals, that could easily be missed. For instance, if you rarely use your car for business, an expert will help you fill the car expense claim appropriately and, thus, save your money.
Developing a long-term tax strategy makes one aware of the chances one can take to reduce taxes and increase returns. It helps you keep track of whether you are exploiting all the deductions that you should take depending on your business operations.
Benefits:
Example:
Investors who invest a lot of money in equipment or technology may suggest using Section 179, which allows a total deduction for a qualifying asset in the year of purchase. For instance, if you buy equipment worth $50,000, Section 179 lets you take a full deduction, which lowers your income and taxes considerably.
This is especially true if you work from home, as some of the costs incurred in running the business could be claimed as business expenses.
Benefits:
Example:
If you have a room in your home solely for your business, then you can work out a percentage of your home overheads (for instance, 10% of rent, electricity, and insurance) and take off from your taxable income. For example, if you spend $2000 on home expenses, you can claim $200 per month on your tax return, saving you $2400 each year.
A new tax act might contain new deductions that you never knew existed, and it may dishearten you to miss out on these or other related credits because you are never bothered to read the latest changes to tax laws.
Benefits:
Example:
The Tax Cuts and Jobs Act (TCJA) of 2017 created the QBI deduction, which grants a 20% deduction on national business income for pass-through entities. If you meet the requirements to take it, you can save thousands of dollars. Staying up to date prevents this from happening and enables you to learn about such advantageous tax provisions.
We at eBetterBooks offer quality taxation services at affordable prices. For more information, please email us at support@ebetterbooks.com
You can not keep a casual approach towards the record-keeping process for your business; to avail of certain deductions, one needs to maintain proper individual records because, in the absence of these records, legal expenditure might not be deductible.
Under the tax law, income is taxable, and expenditure is deductible. This law gives you options on to what extent and at what time you can get certain deductions.
The tax law keeps on changing. Therefore, you should stay updated.
With court cases, primary legislation, and IRS rulings occurring frequently throughout the year, this law changes frequently. If you are aware of it and take action on time, you can take advantage of positive tax opportunities.
