Nobody likes to pay taxes. Everyone wants to pay as little taxes as possible. Paying taxes is complicated. Especially for small businesses and their owners.
How do you know if you are taking every possible deduction? Working with a tax professional can help if you are not comfortable doing your own taxes. A professional normally pays for itself as they know the rules inside and out.
Regardless if you hire a professional or not, below are three simple tax-saving strategies that every small business owner should consider:
1. Retirement Plan
Everyone should be saving for retirement. Small Businesses have several options regardless of their size that allows owners and their employee to save money for retirement. A financial expert will be able to show you the different options that make sense for a business such as yours.
2. Purchase Equipment
Currently the cost of purchasing new equipment can be fully deducted in its first year. Previously the cost would be deducted over five years. Be aware of the limits on how much can be bought in one year, but with smart planning you can maximize your reduction in the taxable income. Equipment purchased on the last day of the year cab still be fully depreciated if it is put into service before year ends. Understanding your profitability throughout the year will assist you in making good investments and avoiding income tax.
3. Open a HSA for Medical Expenses
As a self-employed person, you have the ability to deduct the cost of your insurance premiums. A lot of people also spend a lot of money out of pocket, which is not tax deductible.
A health savings account (HSA) insurance plan will allow you to contribute to a savings account for out-of-pocket medical expenses. You will receive a tax deduction when contributions are made to the account. You don’t even have to spend the money contributed to receive the deduction either.
The greatest part of this is that when you do spend the money, it is not taxable income. As long as it is spent on medical expenses you will never pay taxes on the amount invested or the growth. You can also provide this benefit to your employees which allows them to pay for their medical expenses with pre-tax dollars. Certain types of business cannot participate in this type of plan, so be sure to consult with a professional to see if you are eligible.
These strategies are three easy ways for small business to save on taxes. Your financial professional will be able to help you understand the options for each and the best way to implement any of the ideas if you are interested.3 Easy Tax-Saving Strategies for Your Small Business | under30ceo.com