Taxes are stressful, whether it is a medium-sized business or a multilevel one. But it can even be more stressful for the startup or, in the case of a small business like a sole proprietorship, as you are likely to wear many hats and have to manage a lot on your own. But after managing everything, it is difficult to give your hard-earned money to the government. Therefore, a variety of tax breaks are provided to individual and small business owners byThe Internal Revenue Code which also acknowledges that a business must save some money to run the business and live on. But let us give you some good news, numerous tax-saving methods are there to reduce the liabilities. In this article, we will discuss five important strategies to reduce tax.
Some very common small business tax savings strategies, like timely filing of the income and expenses, must be completed and filed before the end of the financial year. But other methods are also there, such as investing in a retirement plan, which should be done at any time before you are about to file your tax return.
So, if you're looking for strategies to save more money on your business taxes, keep reading to learn about these ways.
Invest Money In Healthcare Requirements
One of the best tried and tested methods to lower business taxes is saving money for medical or healthcare needs. We all know that medical costs are gradually increasing, and these days, it is even more difficult to bear them. So saving monthly for medical needs to assist you when required in the future is a smart move. In addition, indulging in a healthcare saving account or a high deductible health care plan is an ideal way to save money for further medical needs.
Another striking benefit of these HSA accounts or health care plans is they will help businesses or individual employees to lower government taxes. So a single plan will yield multiple benefits. For example, you will reduce the tax, save money for emergency medical needs, and withdraw for medical expenses that are also tax-free.
Employ Your Family Member Or Relatives
Another tried and tested yet the very common method of saving the tax is to hire a family member or a relative as company staff. This method can reduce the tax to a great extent. Paying them regular salaries even proved to be more beneficial. Since the yearly or monthly salary paid to that particular employee is a significant cost to the company, the business can set it off as a part of taxable income, which decreases the overall cost and ensures a stable income for a family member.
Business Trip & Accommodation
Traveling across the country is part of your business plan as a business owner or as an entrepreneur. It can be done to generate more business or to execute certain business operations. If your business has multiple branches across the state, you are bound to travel a lot. But a lot of us are unaware that traveling can be used to reduce taxes. So next time while traveling, book your tickets, accommodation, and all other expenses from the business account rather than your personal account. These will be accounted for as business expenses and can be later deducted from the company's taxable income.
Pay Donation
A lot of time, we pay donations for some humanitarian causes. But do you know that donations can offer tax benefits despite giving mental satisfaction? But your company should donate to registered funds or government charities like PM Care to get tax benefits. Moreover, donating to a well-recognized political party can also avail of tax breaks and reduce your overall tax. But remember to donate by using the company's account.
Availing House Loan
Purchasing a house or a property by applying for a house loan from the bank can be very beneficial. Besides saving your cash, it will also provide significant tax benefits. As it is a long-term asset that will appreciate over time, it will provide tax benefits.
Final Thoughts
With Smart planning, you can minimize your taxable income as a business owner or an entrepreneur. But it is essential to consult with a professional tax consultant to understand the whole thing, as, without proper knowledge, it can cost you more. For more details feel free to consult an expert from Profit Jet.
