Business, Entrepreneur, Lifehacks

Great Ways To Save on Your Small Business Taxes

Great Ways To Save on Your Small Business Taxes 3

The taxes involved in a small business can easily cause confusion for the business owner. This can cause many questions to come up including: why, how much, and how can they be reduced?

It is very important to find available ways that allow your income taxes to be lower in a legal way in order to continue to enjoy having high returns. The best way to accomplish this is by having your small business taxes lowered.

Sadly, there are several types of deductions available for small businesses, but they are unaware of them so they end up overpaying on things that other businesses enjoy writing off. There is so much involved when dealing with taxes and trying to get your taxes lowered. However, if you have the right plan of action, you’ll be able to save a lot as you enjoy life.

Below, we have listed a few ways that can save you a lot of money in taxes:

Monitor Your AGI

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An AGI (adjusted gross income) is what ultimately determines any limitations and tax breaks. An example of this is when you are able to avoid the increased Medicare tax as long as your AGI remains below $200k.

Have an Accountable Plan

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You can get a huge tax advantage if your business utilizes an accountable plan. With this IRS-approved plan, it allows a business to deduct its expenses used for employee reimbursement purposes. Although the business deducts these types of expenses, they are not required to report them as part of an employee’s income which can save on both income that is taxable and employer taxes.

Be Tax-Smart

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Using tax strategies will help you to reduce the taxable income by having a good plan with handling all expenditures. This means you are able to use the costs of equipment as a deduction.

Nonetheless, with businesses that have not been able to make a profit, they may be able to get away by claiming depreciation. This may help with future deductions for when assets could become valuable.

Different courses of action you need to be aware of include:

  • Making prior-year disaster claims for losses on previous returns instead of the current return
  • Having deductions for expenses used for a home office based on the costs
  • Expenses for vehicles used for business purposes can be deducted as compared to their real cost

Besides making claims for the losses due to disasters, you are also able to deduct any expenses toward insurance that your business uses and pays for on a yearly basis. Using the 1040 form is a good resource when needing to determine your deduction for insurance.

The insurance types that a business is able to deduct include the following four types:

  • Insurance for business service interruption
  • Insurance for workers’ comp
  • Insurance for commercial vehicles
  • Insurance for liability

Due to the increase of people making fraudulent businesses to skip out on the small business taxes, small businesses have begun to be scrutinized after they submit their tax filings. That way they can ensure that the business is a legitimate one. If a business is registered as a sole proprietor, single LLC, or entities that are separate, they are advised to obtain assistance in order to know what you can deduct as true expenses.

Take Advantage of Carryovers

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There are many credits and deductions that involve limitations so you’ll be unable to take full advantage of them for the current tax year, however, it would allow for a future carryover. Make sure that you maintain the use of your carryovers so that you can continue to take advantage of them for many years. A few examples include:

  • Deduction for home office
  • Capital losses
  • Credits for general business
  • Charity deduction
  • Operation losses

Extract Business Income in a Tax-free Way

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Although business is taxed for their profits, salary, distributions, and bonuses, many ways exist that let you benefit from the success that your business achieves but not having tax triggered.

To take advantage of this you should find out information regarding:

  • A business loan that has very little to no interest rate is obligated to report any and all interest that is accumulated, but because of the low interest, a business can easily afford it.
  • Many benefits are tax-free and these involve plans for retirement and medical coverages.

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