As citizens, it is our duty and responsibility to pay taxes. But the wise individual only pays the taxes that they must. Tax breaks and loopholes are in place for your advantage, but you are required to find and use those breaks. The IRS is not going to just point it out to you.
Every small business owner should be proactive on keeping their tax bills at their minimum. So there are many tax strategies you can use to keep more of what you make.
In this Rocket Recruiting post, I am going to share various tax strategies, tips, breaks and loopholes to help you.
Tax Tip #1: Cut Medicare Tax By Watching Your Adjusted Gross Income
Your adjusted gross income as a small business owner holds a key to saving on your taxes. If you file a joint return and your AGI is over $250,000, you will pay an extra .9% in Medicare tax.
Throughout the year, you want to keep track of your AGI.
Tax Tip #2: You May Benefit By Filing As An S-Corporation
If you are filing as an LLC, you may benefit greatly by lowering your tax obligations by electing to be taxed as an S-Corporation.
I suggest you consult your accountant about that strategy.
Tax Tip #3: Keep Accurate Figures
Accountants often say that if small business owners would consistently keep accurate numbers, they would be more prepared for the taxes.
Some believe they have a loss and neglect to see they have inventory that takes that loss into a gain.
Keeping track of expenses and revenues is a key factor in knowing where you can save on taxes.
Several years ago, I developed a tool that makes this process so much easier. I suggest you consider The Expense Tracker for your small business.
Tax Tip #4: Consider These End Of Year Loopholes
There are some “tricks” you can use at the end of the year that can help you with taxes immensely.
- Consider waiting to send some invoices until after January 1st.
- Some recurring expenses that you would not pay until some time in January or February could be charged to your business credit card in December and would count as expenses. You could pay up 3 months of rent or prepay some insurance premiums.
You can also pay some expenses by check just before year’s end and mail it registered mail so you have proof you paid it in the tax year.
Tax Tip #5: Max Out Business Entertainment Expenses
Business entertainment expenses just require that you discuss business either before, during or after the entertainment you paid for.
Make sure you take advantage of this deduction. Go golfing… Maybe you can pull off a hole-in-one like I did and the great Dr. Julius Irving witnesses and signed my scorecard. (Dr. J was one of the great NBA players for you in the younger crowd.)
So it was a great day of golf and because business was discussed, it was tax deductible.
Tax Tip #6: Measure The Best Home Office Method
You should absolutely know that you can claim a home office deduction. But you have 2 methods you can use.
- Safe Harbor
The Safe Harbor was designed to make this deduction easier, but there is a chance you will not get all you are entitled to.
It is wise to take the time to see if the Actual method will give you a larger tax break. Yes, it is more time consuming but it may allow you to keep more of what you make.
Tax Tip #7: Keep Carry Overs Documented
Some deductions cannot be taken completely in the same year but can be carried over. And if a small business owner does not keep track of those carry over deductions, they are often forgotten.
Some deductions that this happens with are:
- Net operating losses
- Capital losses
- Home office deductions
- Charity contributions
- General business credits
Tax Tip #8: Keep Mileage Logs
Anything your vehicle, or vehicles are used for related to business carries HUGE deductions. But it is important that you keep mileage logs.
I suggest you put log books in all vehicles and train your family members to log every single trip they use the vehicle for.
These tax tips are just a few. There are many ways you can help yourself keep that money in your pocket instead of in the government’s
I will share more on this subject in the future but for now, I suggest you use The Expense Tracker. It can help you know where to save. Just visit this link to see more.
So, are you following the Rocket Recruiting plan? Have you performed 5 actions today?
I know success is your focus, so keep visiting my blog and we will climb together…