For those living in the U.S we have already entered the season of preparing our income taxes and while the new year can be rejuvenating and motivating for many business owners (and self-employed), it becomes a time of panic as a new tax bill is soon to be due.
However, this yearly worry can easily be diminished with just a little planning and tax knowledge. Try these five tips to lower your tax bill:
1: Create More Year-End Business Expenses
In other words, if you have the budget to do so, purchase items you know you will need for your business the following year before this year is over. This way, you can write them off as a
business expense and reduce your income this year instead of the following year when you need the item. This is more beneficial and impactfull if your business requires making large purchases such as computer hardware, software, and automobiles.
2: Write-Off Household Expenses
Your home office, a portion of your mortgage interest, insurance, utilities, repairs, and depreciation can all be deducted from your tax bill as a business expense.
3: Max Out your Retirement Accounts
Set up a U.S individual retirement arrangement and contribute up to $5,500 each year, tax-free. You can also double your contribution by setting up simple IRAS or SEP accounts. These
accounts allow you to contribute as an employer and individual.
4: Get More Education
If you can prove the course maintains and improves your skills or is required by law to maintain your current business, then you can deduct the cost of your education from your income. Tuition, books, fees, equipment, and transportation expenses are all allowable deductible expenses.
5: Hire A CPA
In the end, it is always better to let the professionals take care of it. Sometimes the money is short (specially on pandemic times), but thinking out of the box and ahead: an professional will
already know every tip and trick in accounting, ensure you get the maximum benefit and saving the most money possible.
Last Words
Hiring a professional in areas that we, small business owners, do not dominate, most of the time it pays off if we take into account the money we invest and the return on investment, in addition to the hours saved!