How to lower your business taxes
Taxes can be extremely stressful. You know you have to pay them but you are losing a large amount of money on them every month. For this reason, you can try to lower your business taxes. There are several good ways that you can apply for your business as well. On Master Moving Guide you will find all the tips you need in order to solve this problem. If you apply the following tips, you will surely lower your business taxes. This of course means, you will have more money to spend or invest in your business. When you no longer have to worry about the high taxes, then you can dedicate your time to finding ways to improve your business and attract more customers.
Employ a family member
If you have a small business, you should hire your family members. This is one of the best ways to lower business taxes. If you do not have a particular family member that you trust and want to have as an employee, you can hire your own child. This might sound a little bit silly, but it actually has many benefits. You will pay a lower marginal rate if you hire your child. Your child can be as young as seven years old! In addition to this, you can eliminate the tax income paid to your children. Lastly, you can put the money they earn in the Roth IRA for some future plans. This will also give you some tax benefits. Since this idea can be a little bit too radical, you can hire your spouse as well. You will reduce the taxable liability with retirement savings for your spouse.
Start a retirement plan when you want to lower your business taxes
As it was briefly mentioned in the previous paragraph, hiring a spouse has benefits. You need to set up a retirement plan for them and for you in order to reduce the taxable liability. In addition to the traditional IRA plan, you can combine it with a 401(K) or SEP IRA plan. This will add up to $55,000 per year. This is a pretty huge amount when compared to only $5,500 per year if you only use the traditional plan. In addition to this, you can stack a 401(K) with a Cash Balance Pension Plan. With this strategy, you can save almost $150,000 per year. However, this is not the only benefit you will receive if you set up a retirement plan. As you will be contributing to these plans, you will get a tax deduction as well. Three plans to consider are
- SEP IRA
- SIMPLE IRA
- Independent 401(K)
You should save money for healthcare needs
Even you do not want to lower your business taxes, you still need to save money for healthcare needs. You can never what can happen in the future so it is better to be prepared. Just like you will follow the ultimate moving guide when you are moving, you need to follow a good plan for healthcare as well in order to reduce business taxes. You can do this through a Health Savings Account, but you have to be eligible for a high-deductible health plan. Not only will you reduce taxes, but you can also lower some medical costs. Lastly, you should know the triple tax advantage and how it functions. Your contributions will count as pre-tax, then they will grow tax-free, and in the end, the withdrawals for medical costs will be tax-free as well.
Change the business structure when you are planning to lower your business taxes
When you are only an employee, your employer will pay a portion of your taxes. However, since you run your own business, you do not have this benefit. For this reason, you have to find another way to lower your business taxes. Even if your business is taxed as a Limited Liability Company, you still need to pay the taxes. However, in some cases, you can remove the employer’s half of the two tax responsibilities and here is how. You can give yourself a reasonable salary. This might sound like something you would rather skip, but it will help you to reduce taxable responsibility. If you are partnering with another business, then you can make a plan with your business partner about your business structure.
You should deduct the travel expenses
If you like to travel, then you know how expensive it can be. For this reason, if you travel for both business and personal reasons, you might be able to lower your business taxes. As you might already know, business travel is fully deductible. However, personal travel for your pleasure is not, but you can make them. You can somehow combine your personal travel with a good business reason. This way, you will get to see the area you want and your travel will be fully deductible. It is a win-win situation for you. In addition to this, you can also use frequent flier miles. Travels are important to keep up the connection and even expand your business somewhere else.
Lower your business taxes with these last two tips
You should get a tax planning software. You can use one of the many offered online and it will much easier for you to prepare and file your taxes. There is a good reason why you should choose an online tax software instead of a plain piece of paper. You will make fewer errors if you use online software. In addition to this, you can also hire a tax professional and even a bookkeeper. This all can help you not to miss any tax deductions, even the small one as well. Lastly, follow your spending. If you do this, you will have more opportunities to catch all the deductible expenses, even the smallest one count.
As you can see, there are many ways to lower your business taxes, so apply some of these tactics on your own business.