Ways a New Business Can Save Money On Taxes
When you start a business, you might not make a great sum of money in the first year. The truth is, most new business struggle in the initial years which makes paying taxes harder than it already is. However, there are many smart strategies that new business owner can apply to save money on taxes. While tax savings strategies, like timing income and expenses, must be accomplished before the end of the tax year, others, such as funding a retirement plan, can be done at any time before you file your tax return.
If you are looking to save money this year on your taxes, here are a few useful ways that will help you do it.
Business Income Tax Deduction
According to the Business Income Dedication law, you might be able to deduct 20% from your business income if your business is a pass-through entity, a sole proprietorship, an S corporation, or a partnership, passing its income down to its shareholders, partners, or owners. A professional tax consultant can help you check your eligibility.
Take Tax Credits
Tax credits are the government’s way of encouraging businesses to do things, or not do things, that affect the greater good. For instance, you can take tax credits for hiring employees, incorporating environmentally friendly initiatives, providing access to disabled employees and giving health facilities to them.
Set Up a Retirement Plan
Funding a retirement plan for yourself and your employees saves money on taxes. Since IRS recognizes most retirement plans, you just need to make sure that your plan, too, is qualified and recognized by IRS so that you can take advantage of the tax savings.
Deduct the Cost of Gifts
You can deduct as much as $25 per employee for the cost of gifts given to customers and vendors. This however, can be a bit tricky which is why it is best to consult a tax expert to guide you through the process.
Time Your Income and Expenses
Timing your expenses means that you move a year’s expense to the next. However, make sure that you decide which year you expect to pay the most in taxes. Before timing your expense, review a year’s expenses and prepay some of those amounts, if you want to reduce your income for the current year.
Buy Equipment/Vehicles for Depreciation Deduction
You can take a tax write-off with the purchase of business equipment, vehicles, machinery etc. The two most common types of accelerated depreciation are Section 179 deductions and bonus depreciation. Where the first one allows you to immediately deduct the costs of certain assets when you put them in service, the latter gives an extra benefit for buying assets.
Did you have no idea about all these smart ways to save money on taxes? Guess what, a professional tax consultant has so many more of these! Contact Mindful Tax Consulting to get in touch with experienced tax consultants who believe in strategized planning to help you achieve your financial goals. Visit our website to see how we can help you.