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Written by Natalie Dawson
Sep 22, 2024
The Ultimate Guide to Reducing Small Business Taxes.
5 minutes
Key points:
Leverage All Available Tax Deductions
Take Advantage of Tax Credits
Defer Income to the Next Tax Year
Maximize Retirement Contributions
Hire a Tax Professional
Let's start:
As a small business owner, reducing your tax burden can have a big impact on your profitability. With the right strategies, you can lower your tax liability and keep more money in your business. Here’s your ultimate guide to reducing small business tax.
Leverage All Available Tax Deductions
Tax deductions can lower your taxable income, reducing the amount of tax you owe. Common deductions include business expenses like office supplies, rent, utilities, and insurance premiums.
Quick Tip:
Ensure that you track and categorize all expenses throughout the year to maximize your deductions.
Take Advantage of Tax Credits
Tax credits directly reduce your tax bill rather than just your taxable income. Credits are available for things like research and development, hiring veterans, and energy-efficient upgrades.
Did you know?
Tax credits can vary by location, so be sure to check both federal and state programs for opportunities to lower your tax bill.
Defer Income to the Next Tax Year
If your business had a particularly strong year, you may want to consider deferring some of your income to the following year. This can reduce your taxable income for the current year and potentially lower your tax rate.
Pro tip:
If you’re anticipating a slower year or a decrease in revenue, deferring income can help you manage your tax liabilities more effectively.
Maximize Retirement Contributions
Contributing to retirement plans not only prepares you for the future but also reduces your current taxable income. Consider opening a SEP IRA or SIMPLE IRA to take advantage of these benefits.
Hire a Tax Professional
Tax law is complex, and hiring a professional can ensure that you’re not missing any opportunities to reduce your taxes. A tax advisor can help you navigate deductions, credits, and other strategies to minimize your tax burden.
Final thoughts:
Reducing your tax liability doesn’t have to be complicated. By using these strategies and consulting with professionals, you can significantly lower your taxes and keep more money in your business.
