The profitability of your business is strongly related to how much you will have to pay in taxes at the end of the year. If you would like to reduce your tax liability, you will need to understand the tax shelters you are missing out on and the deductions that you are owed.
Create A Business Retirement Plan
Setup a business retirement plan which allows for each contributed dollar to be tax deductible. Defined benefit plans are a great choice because they allow for a much larger deduction depending on the age and contribution of the participant.
Use The Right Business Structure
Research each business structure to determine which structure will allow you to save the most on your taxes. Small business owners often skip this step and later discover that their entire tax liability ends up on their personal tax returns.
Keep Detailed Receipts
Keep detailed receipts of the purchases you make for your business. When you deduct these purchases from your taxes, you will need evidence that you made these purchases in the first place. You can also deduct the depreciation of your equipment regardless of whether or not your business is profitable. Also, you may be able to deduct the cost of your equipment the year it is placed into service using first-year expensing. Start-up costs cannot be deducted until you have made the first sale. Then, your start-up costs can be deducted for 15 years.
Transfer Business Assets To Qualified Investments
Transfer your assets from non-qualified investments to qualified investments. The investment gains from a portfolio might not be worthwhile when must of what you portfolio earns is lost through your tax obligations. For example, a tax-exempt bond fund may lower your tax liability.
Use An Accountable Plan For Employee Reimbursement
When you must reimburse your employees for travel expenses, tools and other costs, you will need to use an accountable plan that deducts your expenses while not reporting the reimbursements as an income for your employees. This saves both you and your employees on your taxes.
Deduct Your Home Office
While you are certainly able to deduct for your office, you may also be able to set-up a home office in which you can receive further deductions. Set-up a room on your home used exclusively for work and you will be able to deduct the equipment you use in that room. Each of these steps will add up and significantly help your business's bottom line.
For assistance, talk to a tax attorney.
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