It is a requirement for businesses to pay taxes on the income that they make. However, there are ways you can reduce the amount that you are taxed on. This can free up more of your revenue, so you can continue to grow your business.
Write Off Expenses
One of the most common ways you can reduce your taxable income is by writing off expenses. These include anything that you can consider a business expense. For example, you can write off meals if you discuss business with clients or partners while eating.
You can also write off travel expenses, business insurance, office supplies, office utilities, charitable contributions, and more. When you write off any of these expenses, it lowers how much of your income is actually taxed. This means you end up owing less money in taxes. There are many other tax write-offs that can apply to your business and it’s important to be aware of all of them.
Start a Retirement Plan
If you don’t already have a retirement plan in place, you should establish one. A retirement plan allows you and your employees to set aside money for retirement on a tax-deferred basis. This means contributions are not taxed until they are withdrawn.
As the employer, you will likely have to match employee contributions and the more you contribute to retirement plans, the less taxable income your business will have. For maximum benefits for your business, you should choose the right plan. Safe harbor plans let you get around stringent non-discrimination testing. In these plans, there is a fixed rate for what you as the employer contribute to your employees’ plans, so you can be excused from non-discrimination testing.
Make Smart Purchases
Any purchase you make that benefits your business may have the potential for a deduction. For example, if you purchase new equipment, it can be deducted from your taxes. However, you want to time these purchases just right. If it’s near the end of the year, it may be best to accelerate your purchases so they are in before the tax year ends. This way you can take the tax deduction for the current year. You can even take deductions for certain investments you make.
Yes, taxes are an important part of providing the government with the necessary revenue to provide important services. However, it’s still beneficial to you to decrease the amount you are taxed on. The less you pay in taxes, the more you have to reinvest in your business.
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