As a business owner, creating income is always a goal to support both your business and your lifestyle. Below we put together a short list highlighting a few ideas that could potentially provide more tax deductions and increase your net income.
- Pay your children a salary.
- As a business owner your child’s salary could be tax free to them and tax deductible to your business up to the annual standard deduction limit.
- So instead of giving them an allowance after you receive your taxed paycheck, employ them and get a tax deduction.
- Have your child contribute to a ROTH
- Using the first idea above by employing your child, encourage them to contribute some of their pay to a ROTH IRA now that they have earned income. Their ROTH can be invested and grows tax free. It can also be used to save for college or their first home. The bottom line, with their salary being tax free and the ROTH growing tax free savings can grow much faster.
- Combine vacation with business training
- As of this writing, business owners are potentially eligible to deduct up to 100% of their business travel expenses. You will want to discuss your trip with your tax Advisor, but bottom line by combining your vacation travel with your business travel you could find your travel and lodging tax deductible. This is huge if your out of pocket vacation travel expenses are more than desired.
- Lower your taxable income
- This may sound contrary but earned income is taxed the most in our economy. As a business owner, you want to lower earned income in favor of passive income like dividends, rents, and/or losses and deductions. For example, if you are paying for health insurance or property insurance, if coverage is on a business asset including you as an employee, that expense could be tax deductible lowering your taxable income. If your business is mature enough consider having your business purchase real estate or assets that can be rented creating passive income and additional tax deductions like depreciation.
As you can see, as a business owner you may have options to lower your expenses that many don’t have access to. I would strongly encourage you to give us a call to discuss if you desire to save more. Look forward to hearing from you.
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Disclaimer: iPlan nor any of its associates are tax advisors. The information provided above should be consulted with your tax professional prior to any implementation. iPlan will not be held liable for any damages as a result of failure to discuss with your tax professional.