Tax Reduction Strategies
As a business owner, you are in the tax reduction driver’s seat. This is true regardless of how you operate your business (sole proprietorship, partnership, S Corporation, or C Corporation).
The tax planning strategies we’ve listed below apply to you if you operate your business as a sole proprietorship. Of course, there are dozens and dozens more strategies in addition to these, but the purpose here is to give you some select strategies.
We’ve provided a simple list of ways you can reduce your self-employed taxes below, however, keep in mind there is documentation, setup, and other processes that may need to happen in order to qualify a specific deduction. Consult your own tax preparer.
Business Meals
Eliminate the word “friend” from your vocabulary. From now on, these people are sources of business, so start talking business and asking for referrals over meals and beverages.
Hire Your Children
This creates tax deductions for you and also creates non-taxable income or very low-taxed income for your children. To do this your child must legitimately be working in your business.
Start-up Expenses
If you start a new business you can deduct up to $5,000 of start up costs immediately instead of having to amortize them over 15 years.
Auto
Identify the auto deduction that will give you the best deduction. You may take an actual expense deduction or a standard mileage rate.
Home Office
Qualify your office in your home as an administrative office.
Hire Your Spouse
If you are self-employed and married, consider hiring your spouse and implementing a Section 105 medical plan to move your medical deductions to Schedule C as a business deduction.
S Corporation
Consider whether it would be more advantageous to operate as an S Corporation instead of a sole proprietorship. There are more than one factors that should go into this decision, such as self-employed taxes, reasonable compensation, fringe benefits, qualified business deduction, and several others.
Hopefully this will help you not leave money on the IRS table.
If you have questions about any of these items and are interested in working with a Certified Tax Coach to reduce your taxes, send us an email to admin @alignedcpa.com and we’ll be happy to see if we’re a good fit for you.
ABOUT JOY
I help our client’s keep more money in their pockets by implementing proactive tax strategies. I promise you, working with a CPA and Certified Tax Planner can be much more exciting than crunching numbers and reviewing last year’s taxes.