Many small business owners aren’t aware of ways they can lower their tax liability. When it comes time to prepare your business taxes each year, you’ll need to consider a few different strategies. By lowering your taxes through strategic tax preparation, you’ll have more money in your pocket to invest in growing your business.
Do you want to pay less taxes? If so, then read through the following six tips.
1. Know what you can deduct
Did you know that some business expenses are deductible? You can deduct expenses for the purpose of producing income as long as you can prove that it wasn’t a personal expense.
Common examples include office supplies, vehicle expenses, travel expenses (including hotel and meals), and part of your mortgage or rent.
2. Itemize everything you can
When it comes to eliminating tax liability, you can never be too thorough. The more deductions you have, the lower your taxable income will be. Some common deductions include:
• Home office deduction
• Travel expenses (airfare, taxis, lodging)
• Business entertainment
• Self-employed health insurance premiums
• Health insurance premiums for partners and dependents
3. Bundle your deductions
If you’re planning to make a big purchase for your business, such as expensive office or utility supplies, wait until the new year if possible. This will allow you to deduct all of that expense for that year’s taxes, instead of having to divide it between two tax years.
To maximize your deductions even further, buy this equipment before December 31 and use it in your business before January 1 so that you can count the full cost as a deduction for the current tax year.
4. Use the standard deduction for simplicity
Using the standard deduction is one of the best ways to reduce your business tax liability. The standard deduction allows you to subtract a part of your income from your taxable earnings, which results in you paying less tax. You can take the standard deduction if you are not itemizing your deductions.
5. Take advantage of tax breaks
The IRS offers tax breaks to small businesses; it’s just a matter of knowing what they are so that you can take advantage of them. One such example is Section 179 of the Internal Revenue Code, which allows businesses to deduct the purchase price of qualifying equipment and software that’s financed or leased.
6. Consider shifting income
This strategy involves shifting income from one year to another by either accelerating or delaying income or deductions. For example, instead of billing clients in December, bill them in January and get paid in February, which will push income into the following year’s tax return. The same applies for making large purchases: if you can hold off until next year, do so.
By delaying income and accelerating deductions, you’ll benefit from a lower tax rate this year. The opposite is also true. By accelerating your current year’s income into this year and delaying expenses until next year, you may end up with a lower tax rate for the current year.
Let us help you lower your business taxes
Taxes can be a complicated process for the average small business owner, but not for Abbo Tax CPA! We have years of experience preparing business and personal tax returns for our clients on time, so no matter what time of year it is you don’t have to worry about your taxes. Our affordable prices make it easy on our customers as well, who don’t have to pay an arm and a leg for top-quality tax preparation services.
Give us a call to learn how we can help you lower your business taxes like we’ve done for several of our happy clients.
