Small strategies make big impacts when it comes to figuring out the year’s deductions. Sadly, many small business owners never get the help they need because they’re simply unaware of the many tax deductions available to them. This is where a good, knowledgeable CPA is invaluable. And since you’re hiring your CPA to help you organize and prepare your taxes – he or she becomes a deductible business expense, too. Tons of little-known, obscure strategies will help pull you out of the hole come tax time; it’s just a matter of discovering what they are and how best to take advantage of them. If you want to shave money off what you’ll owe the IRS next year, give these strategies a try. You’ll be surprised at how much of your hard-earned cash you’ll be able to legally keep.
Deduct the Cost of Help
Hire an expert. We’ve already discussed the wisdom behind hiring a professional accountant to help keep your books in record shape, but there are other pros out there who could make your life easier while building up your deductibles, too. Everyone from the copy writer who pens your social media posts to the team who cleans your office are fair game. So long as they’re helping you run your business and you pay them for that purpose, the money you pay them is tax deductible.
Think About Restructuring
Consider restructuring your business model. Are you operating as a sole proprietorship simply because it was the easiest and quickest way to get your business up and running? Another business model might be more tax-friendly. Check with your certified public accountant to find out the pros and cons of the business model you’re currently using, and to see if another structure might be more beneficial.
Track Your AGI
Keep an eye on your adjusted gross income. Your adjusted gross income, or AGI, is your gross income minus all your adjustments. It’s a good idea to monitor this number all year long, simply because once your business exceeds certain numbers in income, certain tax breaks disappear. Know the limits in order to avoid losing valuable deductions that you could have otherwise claimed.
Itemize Office Purchases
Deduct the cost of necessary items. You might be surprised at the list of items that qualify as deductible expenses, depending upon what type of business you own. The old standards qualify; items such as computers, laptops and non-proprietary software. But did you know your office furniture is deductible, too? Office chairs, mats, desks and even smart phones can be deducted from your tax bill so long as they’re used for business purposes. And while you’re itemizing the cost of new office furniture, don’t forget to deduct the cost of business supplies as well. Printer paper, printer ink, electricity and more are all deductible business expenses.
Spend Your Pre-Tax Dollars
Take advantage of pre-tax dollars. Spend company money on business needs such as a new home office remodel or company vehicle. You can use these purchases, or portions of them, as deductions on your tax return. Keeping a home office will let your write off a portion of your monthly mortgage payment. You can do the same with repairs and maintenance for the company car.
Donate Instead of Selling
Declare losses instead of gains. If you sell off those aging store fixtures, you’ll have to declare the paltry amount you make from the sale as taxable income. But if you donate them instead, you can claim them as a loss and take a deduction. The same goes for obsolete office equipment and aging company vehicles. Taking them as losses will benefit you come tax time.
Catch Up on the Bills
Pay January’s bills early. Depending upon your business structure, any funds that remain in your business checking account on December 31 may be fair game for taxation. This is why it makes sense to pay January’s bills before the end of the year. Less taxable income translates to fewer taxes, and you’re taking care of business in the process. This strategy provides tax relief and it sets you up for financial success during the first part of the new year.
Hire Your Children
Put your kids to work. If you hire your own children to help out in the family business, you may be able to deduct their wages. You’ll also save money by not making payments to Social Security and Medicare for anyone under the age of 17.
Open an HSA
Open a Health Savings Account. Different from health insurance, your HSA helps cover expenses that your insurance typically won’t, such as your deductible, your co-pays and any over-the-counter medications your family might need. Money that you invest in an HSA is a deductible expense; one that helps keep you and your family heathy and feeling great.
Allow for Meals and Travel
Deduct meal and travel expenses. If routine travel is necessary part of your business, the expenses you incur are tax-deductible. Mileage, percentages of meals, the costs of lodging and more will help you get a cut on your small business tax bill.
It really does pay to itemize your deductions when you’re a small business owner. The keys are understanding all the possible deductions and remembering to keep receipts and proofs of purchase for every business-related service or item purchased. You must have proof that you bought the merchandise or used the service that you’re claiming.
Timing is important, as well. Knowing exactly when and where to move your money in such a way that it lowers your year-end taxable income is vital. It’s all perfectly legal if you put it in the right places within the allotted time. Consult with your CPA about money movement strategies to reduce small business taxes.
Lastly, learn to use the money you have to your best advantage. It’s better to use it on something like health benefits or retirement than it is to let it linger in your checking account and show as taxable income.
When you’re ready to claim all the deductions that are due you as a small business owner, give us a call. We’ll help you find every strategy for saving money on next year’s return.