Tax season is over! Now it’s time to start planning for the next year taxes. To many this might seem premature but planning ahead pays! Therefore many people are in a search for the ways of reducing the tax burden and the tax experts have pointed out many strategies that can be followed to save a considerable amount of cash from taxes. Here we discuss 5 ways to save money on taxes and if you really need to reduce your tax burden, the time you spend here is really worth it!
First and foremost, what you can do to start protecting your profits is put some in a qualified retirement plan. If you have a retirement plan, then you’ll be able to reduce your tax amount as the Self-employed business owners can contribute up to 20% of the total earnings to the retirement plan, but limited to $50,000. When it comes to the corporations, this amount has been lifted up to $250,000 as 25% of the total earnings. This particular amount will be deducted from your total earnings, so you’ll be able to reduce your tax burden by a large amount. Also you’ll be able to get a tax credit up to $500 to cover administration costs for the first three years by adding your employees to a qualified plan.
Employee health plans are the next position where you can have a tax deduction. This is one of the most overlooked tax credits. If you afford to pay an amount equal to 50% of your employees’ healthcare premiums, you will be qualified for a credit up to 35% of your taxes. According to the tax experts, this strategy may not suit for the business owners who are not paying for their staff’s healthcare premiums, but this is most suitable for the business owners who pay 25%-40% of their employees’ healthcare premiums.
Spending a money on your marketing campaigns can also be a good solution to decrease you tax amount while increasing your business revenues. The key is to make sure you track the ROI (return on investment) to ensure to is an effective marketing program. Therefore most of the Small-business owners that are smart in this process of pouring cash into their marketing budgets can have the tax amount deducted quite considerably coupled with effective marketing strategies.
In the previous years, there was a 100% bonus depreciation which facilitated the business owners to cover their all costs related with their businesses without additionally spending even a dollar and now it has been downgraded to 50%. If you are confused about the depreciation of the bonuses for your small business, now you don’t need to be worried about it. This is because according to the experts, the bonus depreciation which was downgraded to 50% will come back to 100% in near future. So it is better to keep all the records and documents of the equipment purchases while keeping eye on the latest business news updates and for sure, you’ll be able to have a big tax deduction.
Many entrepreneurs neglect calculating their small expenses and eventually without knowing, they miss the chance of deducting their taxes. Banking fees such as online transaction fees and checking account fees or other charges like PayPal fees that seem small at the time add up! All these small expenses must be included in your yearend budget if you want to keep your money. Another important thing that you should follow is tracking the mileage and calculating the cost according to the IRS standard mileage rate. You can use the Smartphone applications like MileBug, Trip Cubby to calculate the mileage and it would be better if you can add all driving costs with including parking fees to account. If you calculate all these expenses simply, you’ll be able to have the yearend budget with the accurate income. Therefore your tax burden also will be significantly deducted.