Are you finding tax season to be a little bit unmanageable?
The fact of the matter is that for most Americans, tax season is a little bit stressful, and this is intentional. Small business tax strategies exist to keep you from organizing your business finances in such a way that minimizes your tax liability.
Well, look no further. Here is a rundown of the best legal tax breaks out there.
Employ Family Members
First, you should keep detailed records of hours billed and services dispatched; this helps demonstrate that the role is genuine and not merely a way of transferring money to a family member. Next, the job should be clearly defined and have classifiable tasks that match the skills and experience of the family member.
Furthermore, supplying the family member with the necessary tools and equipment needed to perform their job (e.g., laptop, tools, etc.) would also show proof of an actual job.
Finally, treat your family member as an employee and don’t cheat Uncle Sam from his due; maintain accurate records of payments and taxes.
Build a Retirement Fund
One way to get started is to open an individual retirement account (IRA). IRAs are tax-advantaged accounts that allow you to save for retirement and reduce your taxable income at the same time. You can deposit up to $6,000 a year into an IRA, though people over 50 have a higher contribution limit.
Another way to minimize taxes and start saving for retirement is to put money into a 401(k), which is an employer-sponsored retirement savings plan. 401(k) contributions can be tax-deductible up to certain limits. Finally, opening a taxable brokerage account is another option for retirement savings.
Focus on Healthcare
One way to minimize your tax liability legally while focusing on healthcare is to take advantage of the Health Savings Account (HSA). An HSA is a tax-deductible savings account created for the purpose of paying for medical and healthcare expenses.
If you qualify for an HSA, you can use the account to pay for medical and healthcare-related services without being subject to taxes. Additionally, the money you contribute to your HSA is deductible from your taxes, so it can be a great way to lower your taxable income.
Choosing to get incorporated can be a great way to minimize your tax liability legally. By incorporating your business, you can access various deductions and credits that are not available to sole proprietors and unincorporated individuals.
Additionally, incorporating can provide you with protection from personal liability relating to potential bankruptcy proceedings. By choosing to get incorporated, you can access benefits such as limited liability protection, as well as tax savings.
Consult with Tax Accountants
When considering how to minimize your tax liability legally, one of the best steps to take is to consult with tax accountants. Tax accountants are trained to provide expert advice on a range of topics related to taxation, including income tax, land tax, company tax, capital gains tax, GST, and other applicable taxes in your jurisdiction.
They can provide you with recommendations on steps that you can take to legally reduce your overall tax bill, from claiming deductions appropriately to taking advantage of available tax breaks.
Read More About Small Business Tax Strategies
Making wise decisions when it comes to deductions, credits, and taxes is essential to minimizing your tax liability. Take advantage of this opportunity to limit the taxes you owe by learning more about small business tax strategies.
Looking for more tips and ideas? We’ve got you covered. Check out some of our other posts now.