As a business owner, you know that taxes can be a significant expense. Fortunately, various tax breaks are available to help you save on your tax bill. To ensure you’re taking full advantage of all the available tax breaks, Troy Renkemeyer shares an overview of some tax breaks business owners should take advantage of.
1. Home Office Deduction
You may qualify for this deduction if you have an area in your home (or apartment) used exclusively and regularly as an office. You can also deduct costs related to the maintenance and upkeep of your space. The deduction amount is based on the square footage used for your office, and there must be records such as utility bills, rent receipts, and other written evidence to support your claim.
2. Self-Employment Health Insurance Deduction
This deduction allows self-employed individuals to deduct their medical insurance premiums from their taxable income. The amount deducted is limited to the lesser of 100% of the premiums paid or 20% of net earnings from self-employment (not including contributions to an employer-sponsored retirement plan).
3. Retirement Plans Contribution Deductions
Businesses can deduct up to 25% of eligible employees’ pay for contributions to qualified retirement plans. In addition, employers can also take a tax credit equal to 50% of the first $1,000 contributed by each eligible employee during the year (up to $500 per employee).
From 401(k)s to SEP IRAs, these contribution plans offer many benefits such as tax deferral and employer matching. Evaluating the features of each plan that best fit your company’s needs is critical for setting up a retirement plan that could ensure future financial success for employees and employers.
4. Business Use Of Automobile
Businesses can deduct expenses related to using their vehicles for business purposes, such as travel expenses (gasoline and oil), parking fees, tolls, and depreciation expenses associated with owning or leasing a vehicle used in business activities.
5. Start-Up Costs
Start-up costs are any costs incurred before starting a business or acquiring an existing one (e.g., legal fees, accountant fees, etc.). Most start-up costs can be deducted up to $5,000 in the first year, with any excess amortized over 15 years after the commencement date.
6. Employee Benefits
Many businesses offer their employees fringe benefits such as health care coverage or tuition reimbursement programs, which can be deducted from taxable income up to certain limits set by law ($50/month per employee). Also, employers who provide meals and lodging for employees may qualify for deductions under certain circumstances (depending on local regulations).
7. Energy Tax Credit
If you install energy-efficient systems in your place of business, such as solar panels or wind turbines, you may qualify for an energy tax credit equal to 30% of the cost incurred through 2020. In addition to this federal credit, many states offer additional credits, so it pays off to look into state incentives available in your area when investing in green energy projects.
8. Research And Development Tax Credit
The credit incentivizes businesses to invest in companies with innovative ideas and processes, helping to trigger a domino effect that can drive economic growth. Companies receive the credit based on how much money they spend on qualified research activities or processes associated with developing technology or products commercially.
Maximizing Your Tax Breaks
Here are some strategies to help you get the most out of your tax breaks.
Research Your Eligibility
The first step in maximizing your tax breaks is understanding what deductions or credits you are eligible for. The US government offers numerous incentives to small businesses. Researching these incentives and how they work will give you an idea of which could benefit your business the most.
Staying organized is vital when taking advantage of all available tax breaks. Having organized financial records will make filing taxes more manageable and ensure all possible deductions are considered when filing. It’s essential to keep track of expenses related to running a business throughout the year so nothing gets missed come tax season. Also, keep track of receipts from expenses such as travel or office supplies.
Find An Expert
If navigating through the potential tax breaks seems daunting, don’t worry! Many qualified professionals specialize in helping businesses maximize their available tax credits and deductions each year. Working with an expert with experience in this area can save you time and energy while ensuring that all possible deductions are considered when filing taxes each year.
Take advantage of these eight tax breaks to reduce taxable income while freeing up cash flow throughout the year. Consult with experienced accountants regarding specific deductions and credits that apply directly to your business enterprises. Troy Renkemeyer believes business owners could save thousands at tax time by doing so. With proper planning, businesses will find themselves well positioned not only come April 15th but throughout the entire fiscal year.