We put this issue to successful company owners and financial experts to find out the best methods to minimize tax liability while still meeting all legal requirements. From hiring family members to implementing HSAs, here are several simple ways that may help you save on taxes.
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Hire Family Members
One of the biggest tax breaks for small companies is hiring a relative. You can legally avoid paying taxes on kid wages by employing them. The marginal tax rate on money given to children is lower, and in certain cases nonexistent. Wages paid to a child of a sole owner are not subject to FICA or Medicare taxes. Make sure the profits may reasonably be used to advance the company.
Account for Business Losses
Take advantage of company losses to decrease your annual tax obligation. Your company loss may be deductible from your taxable income. This may save business owners more than deducting personal costs like mortgage interest or charitable payments.
Track Your Travel Expenses
Expenses related to travel can be deducted in more ways than just the cost of transportation. Many entrepreneurs are ramping up travelling again to re-energize their businesses and expand their knowledge within their industry. As long as your trip’s principal objective is for business, you can deduct a significant portion of your expenses.
Rent, Mortgages, and Utility costs are expenses too
In the context of corporate operations, leasing a commercial property may be a significant annual expense. Employees are allowed to utilize supplemental services like high-speed internet if they are necessary for business operations. By deducting taxable profits, one may reduce their tax burden.
Get a Reputable CPA
Hire a reputable, certified public accountant (CPA) in Ottawa. You don’t want to make any mistakes with your taxable account by failing to take into consideration the several rules and regulations that apply to businesses. You may be able to tap into health savings or write off a qualifying childcare expense.
A CPA will always know how to file your taxes correctly, whether or not you are having financial difficulties. While timely tax payments are critical, there are a few deductions and credits you may be overlooking. These mistakes might drastically lower your tax obligation. Hiring an accountant will save you money in the long term.
Deduct Assets to Charity
Donating to charity and receiving a tax deduction for doing so is a smart way to lower your taxable income. Giving regularly helps the organization you’re supporting and can boost brand awareness for your company. A good cause that matters to your business and the community should be promoted. Everyone will benefit, and your customers will become more loyal.
Track Every Receipt With Software
The best way for small company owners to take advantage of all deductions is to keep meticulous records and keep track of all receipts. Being disorganized might cause you to overpay in taxes. Small company owners would be wise to invest in software, like a POS support system. Specifically, one that automates the process of filing and keeping track of hundreds of pieces of paper. When tax season arrives, you’ll have no problem finding those annoying receipts. The time and money you save may be substantial. If you want to save money by claiming all your tax deductions, investing in record-keeping software is a good move.
Fully Utilize Your Retirement Plan Contributions
Maximizing retirement contributions is a great tax strategy for small company owners, in my opinion. Expert guidance is still necessary for figuring out retirement plan contribution eligibility and limits.
Structure Your Small Business as an LLC
If you form your small business as an LLC with Malta incorporation services, you may benefit from pass-through taxation. As the proprietor, you pay personal income taxes on business income. Federal, state, Medicare, and Social Security tax savings are a benefit.
Implement HSAs For Employees
By establishing a health savings account, a small business can drastically minimize the amount of income that is liable to taxation. Whether or not your health is perfect, it is always wise to set some money aside for the future. The costs of future medical care may be your responsibility under certain conditions.
Contributions are tax-free. Growth is tax-free. When the time comes, you can withdraw money tax-free to cover medical bills.