Every business owner knows that taxes can be a significant cost of starting and running a small business. The good news is that there are many ways to reduce the amount you pay in taxes and fees. Small business taxes are typically calculated based on your business’s income, deductions and expenses. You can use this information to your advantage when filing taxes each year. In addition to taking advantage of tax deductions and keeping detailed records, there are also a few things you can do to lower your overall tax burden as soon as possible. Reducing your business taxes as soon as possible is one of the best ways to help make sure you don’t overextend yourself or end up paying more than necessary. Here are some tips for tax reduction sooner rather than later:
One of the best ways to lower your taxes is to get organized early in the year so you can take advantage of tax credits and deductions. For example, if you’re operating as a sole proprietorship, you may be eligible for the standard deduction. If you qualify for the standard deduction, you won’t be able to deduct any expenses that are not directly related to your business. If you wait until April to get organized, you may have missed the opportunity to take advantage of tax credits and deductions that are only available during certain parts of the year, such as the energy efficient home credit, which is only available for the first part of the year. It’s a good idea to start keeping track of your business expenses as soon as possible so you can make the most of these tax credits and deductions.
In addition to getting organized and claiming tax credits and deductions, it’s important to remember that there are several government benefits that are available to small business owners. If you’re self-employed, you can claim the same tax breaks for health care, retirement savings, and child care as employees receive. You may also be able to claim a tax credit for the cost of purchasing and installing energy efficient equipment, such as computers or air conditioners. While you can’t claim the equipment as a business expense, you may be able to claim the cost as a tax credit. In addition to claiming these benefits, you should also make sure you file and pay estimated taxes each quarter so you won’t have to pay any penalties.
When you start a new business, it can be challenging to keep track of all your expenses. Some expenses, such as office supplies, will typically be considered deductible. However, you should be careful not to over-deduct expenses that can be considered “nondeductible.” One of the most common errors small business owners make when filing taxes is over-deducting expenses. Deductions are reduced by the percentage of your income, so keeping track of all your business expenses will help you determine whether you’ve been misclassifying expenses or claiming too many deductions. It’s also a good idea to keep track of the way you’re spending your time. While it may be tempting to take your computer home to work on the business from home, it’s not deductible. Instead, you should be focusing your efforts on growing your business as quickly as possible.
As you begin to get organized, don’t forget to deduct any personal expenses that are related to your business. For example, if you use your car to run errands for your business, you can deduct the portion of the car’s operating expenses that is related to your business. If you travel for your job, it’s a good idea to keep track of your mileage and fill out a travel deduction form to make sure you’re getting the most out of your work-related travel.
While it’s important to get organized and claim all the benefits you’re entitled to, it’s also a good idea to start saving for retirement and healthcare. When it comes to retirement, it’s important to remember that you’ll likely be responsible for paying taxes on your retirement contributions, so it’s important to plan accordingly. It’s also a good idea to set up a healthcare plan to make sure you’re covered while you’re still working.
The sooner you get organized, the sooner you can take advantage of tax credits and deductions that will help lower your overall business taxes. In addition to getting organized, it’s also a good idea to keep track of your business expenses so you can avoid misclassifying expenses or claiming too many deductions. In addition to getting organized and keeping track of your expenses, it’s also a good idea to start saving for retirement and healthcare so you can avoid running out of money during retirement or facing significant healthcare expenses.