We all know the two things that you can't escape in life: death and taxes. But while you can't avoid them, you can find deductions on your taxes to reduce the amount you pay. Not only are there deductions you may not know about for personal taxes but there are likely deductions for business taxes you don't realize. With a bit of research, you can pay less when you file.
One of the easiest methods to save on your taxes is to defer them. Keep in mind, you won't be avoiding the taxes forever but instead, you will be putting them off until later, hopefully, you are in a lower tax bracket at that point. If you aren't sure how to do this, a great example is your 401(K) or IRA. You put the funds in today and then don't pay the taxes until you withdraw at retirement.
While the above method works for personal taxes, it doesn't help someone with a business. The more successful your business is, the higher tax bracket you will put yourself into and then the more taxes you will end up owing. As a result, as a business owner, deferring and a 401(k) does not make sense come tax time. It is probably better to invest in your business.
It may seem odd to spend money to save money, but when it comes to business taxes it makes sense. As you are able to deduct many things on taxes, it makes sense to buy things that are deductible. But keep in mind, a dollar spent is not a dollar in a tax refund. So before you go spending all the income the business made, consider if you really need it.
For someone running a home-based business, they have the best of both worlds. They are able to run their business taxes through their personal taxes and deduct things most cannot. For instance, items such as magazine subscriptions travel or anything else that can be connected to your business can be a deduction. Part of your home, utilities, and vehicle are deductible as well but there are rules as to how much you can deduct.
Another method to lower your taxes payable is to lower the tax rate you pay. While this sounds difficult, it isn't too difficult but you likely will need the assistance of a professional accountant. By moving some of your regular income to capital gains, you will pay less for it. Another idea is that you can hire family members who live with you but are in a lower tax bracket such as parents you are caring for our children. If they have other income, this can cause problems for them though.
As with any tax advice, it is best to talk to a professional tax accountant when it comes to business taxes or personal taxes that you don't understand. They have more experience and are trained on how different tax laws apply.
ALJ Business Services,LLC