How to Save Money with Tax Planning!
If you aren’t careful as a small business owner, you can be saddled with a surprisingly large tax bill at the end of the year. To prevent this, it’s vital that you engage in tax planning, and the sooner the better!
The first tax planning method to focus on is maximizing deductions. Business owners often forget home deductions, auto deductions, and out-of-pocket expense deductions. To prevent this, make sure you have an expense tracking system.
The second tax planning method you can utilize is income shifting. Income shifting is moving income from a high tax bracket to a lower one. How is this usually done? Through entity restructuring, first and foremost but, if you have family members working for you in a lower tax bracket, they can be paid as well to minimize your tax bill.
The third method you can implement is deferrals. Deferring the taxation of income to a later date is one of the easiest ways to reduce your taxable income. Many retirement accounts allow you to put pre-tax money into a fund that will only be taxed when you withdraw cash at a later date – when you’ll probably be at a lower tax bracket!