Most of the articles you're going to find online are about how to reduce taxes or what the best tax deductions are for a small business, and may lead you to pretty silly answers.
I'm going to show you five massive ways that you can reduce your taxes and it's the foundation of what we use in our tax reduction planning service.
One of the biggest tax reduction strategies available is to consider converting to an S-corporation.
S-Corps allow small business owners to split their income between a salary that the corporation pays them, and the dividend they earned as the owner.
Without getting too in-depth, I'll just let you know that an S-corporation will help you reduce your Social Security and Medicare taxes in almost every situation.
Self-employment taxes consist of the 2.9% Medicare tax and the 12.4% Social Security tax.
When you are a sole proprietorship, before you convert to an s-Corp, your entire income will be subject to self-employment taxes, and when you become an S corporation, only the salary paid from the business to you will be subject to self-employment taxes.
Obviously there are many aspects to consider such as the QBI deduction, Social Security limits and the overall goals of each business, but S-corporations almost always save thousands a year for small business owners.
Small business retirement plans might enable you to deduct 74,000 a year into Investments.
There are many nuances and rules, so please book a consultation to learn what’s a good option for your business.
There are rules, contribution limits, and employment law that all need to be considered.
Small business owners can utilize both the employer and employee contributions into retirement plans.
All you need to know is the employer contribution in a 401k, SEP IRA, simple IRA or defined benefit plan is incredibly tax efficient.
One of the biggest tax write-offs any business owner can make is a retirement plan contribution.
If you legally involve your child in your business, and they actually participate properly, you might be able to shift income out of your high tax bracket and into the child's low tax bracket.
There are many rules around this and it needs to be a bona fide employment, but your children might provide a significant tax mitigation opportunity.
Your business can also start to get involved with Buy and Hold real estate which provides significant tax reduction opportunities.
First off, rental real estate allows you to:
If you have a company holding an office building and your S corporation then rents and leases from that company, you would be able to shift income from a vehicle which is subject to Social Security and Medicare tax, over to a more tax advantaged entity.
Buy and Hold real estate might be a perfect tool for you to not only reduce your taxes but to build significant wealth.
If you want your business to grow, you're going to need to invest in excellent equipment that allows for uptime, low failure rates and high production.
One of the foundations of tax reduction planning is helping you purchase your equipment and vehicles in the most tax efficient manner.
We can help you align your depreciation schedules with your amortization schedules which allow you to manage debt, improve your efficiencies and manage your balance sheet.
Schedule a consultation and tax analysis today with RL Allen Tax & Accounting.
