Tax season is never far away, and the time to start saving money on next year’s taxes is now. Save money and reduce your tax time stress with these seven small business tax tips.
- Utilize the Qualified Business Income Deduction
The Qualified Business Income (QBI) deduction was introduced by the Tax Cuts and Jobs Act (TCJA) in 2018. If your business is a pass-through entity — a sole proprietorship, an S corporation, or a partnership, for example, passing its income and deductions down to its shareholders, partners, or owners to report on their individual tax returns — you can take the QBI deduction.
- Put Resources into Retirement Plans
Setting up and funding a retirement plan for yourself or your employees can save you money on taxes. To allow deferment of taxes on earnings until they are taken, it must be a recognized IRA or defined contribution plan such as a 401(k) or 403(b).
- Get Creative with Depreciation Deductions
When buying equipment for your business, consider qualified energy-efficient equipment. When it comes time to file taxes, you can claim Section 179 depreciation and 100% bonus depreciation on the purchase.
- Don’t Forget Tax Credits
There are plenty of other tax credits that you can utilize to reduce your costs. Going green, hiring employees with diversity and inclusion methods, and making your business accessible to disabled employees are just a few ways that you can save.
- Give Gifts to Employees
As a business owner, you can give small gifts to employees without having any tax implications. This is great for the holiday season. Give more of your own time and money to those who assist you in making your business successful.
- Pay Attention to Income and Expense Timing
Another great way to save is by timing out your income and expenses and prepaying your taxes ahead of time. This way, you can lock in deductions and avoid paying more taxes when your current income tax rates are higher.
- Pay Down and Write Off Debts
To save on your taxes, pay down and write off any debts you have. This way, you can show a decrease in income and increase your deduction for the interest paid on the loans.