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Is That Deductible? 8 Tax-Saving Tips for Business Owners

Did you know that it is estimated that small businesses pay an average tax rate of 19.8%?

Many small businesses find taxes difficult to do and understand, which is why some business owners may be paying more than they have to.

Check out our 8 tax-saving tips that can help your business save more money.

8 Tax Saving Ideas

There are many ways in which you can cut your costs and save money when it comes to paying your businesses taxes.

With so much information available when it comes to the income tax deduction for business owners it can be confusing what information applies to your business.

Which is why we’ve put together a small guide of the best tax saving tips, have a look now:

1. Home Office Deduction

If you are among the many small business owners who work from home, you might be eligible for tax deductions that relate to your home office.

For example, you can deduct tax on insurance, mortgage interest payments, repairs and utilities such as internet and gas.

You can’t claim ridiculous amounts of your household bills, but you can claim tax relief for the costs associated with running your business from home.

To do this you need to calculate what you use as a business expense and keep a note of all of your information, ready for when it is time to file your taxes.

2. Keep Your Receipts

Small business tax tips 101: make sure that you keep and track your business expenses. Which means ensuring that any business related cost is accounted for.

For example, if you need to buy some stationery for your business, you can keep your recipes and claim the money it cost you as a business expense.

There are specific deduction costs and allowances which depend on your business structure, so make sure you understand what you are entitled to and keep the relevant documentation.

You can get apps that allow you to take photos of your receipts if you are afraid that you will lose them.

3. Car and Mileage Expenses

You can claim car and mileage expenses, so if you need to use your car for business, then you can get tax relief for this.

If you are looking for the ultimate small business tax deduction secrets when it comes to car and mileage expenses, we have what you need.

You need to evaluate whether the standard method or the actual method of automobile deductions is best for your business.

The standard method is 58 cents per business mile, plus tolls and parking.

The actual method is where you add up all your automobile expenses and then multiply it by your actual business percentage (business miles/total miles for the year).

4. Salaries and Wages

Our favorite piece of tax advice for a small business is that any payments to your employees (such as their salaries, wages, bonuses, and commissions) are a deductible business expense.

So make sure that when you are paying your employees that you are getting tax relief on this expense.

If you use freelancers or contractors, you can also deduct this expense from your final tax bill. To do this, you need to issue your contractors who will receive more than $600 from you in the year with a Form 1099-MISC.

5. Business Property

Similar to if you work from home, if you rent a property where you operate your business from (i.e. a shop or an office) then you can claim tax relief on the expenses you pay for the place.

Your electricity and utilities are also fully deductible, just like they are if you are a business owner with a home office set-up. Make sure you keep track of your rental and utility expenses.

6. Retirement Plans

Self-employed workers can reduce their taxable income by putting additional money towards a traditional retirement account. The money isn’t taxed until the funds are withdrawn in retirement.

Small business owners (who are under 50) can contribute up to $5,500 each year to a traditional or Roth IRA. Whilst those over 50 can contribute up to $6,500 each year.

7. Insurance

If you pay insurance that is related to your business, you might be entitled to tax deductions.

Some of your insurances are fully deductible. For example, if you have a business owner’s policy, flood insurance, business continuation insurance, cyber liability coverage, and/or malpractice coverage.

Health insurance is a little different. Some small businesses qualify to claim a tax credit of up to 50% of premiums paid for employees.

For self-employed individuals, however, the costs of health coverage isn’t a business deduction. Instead, the premiums are deducted on the individual’s personal tax return.

8. Employee Benefit Programs

Finally, another great way you can saving tax is by deducting the cost of running any employee benefit programs. For example, if you have education assistance or dependent care assistance then these are deductible from your tax bill.

Similar to employee benefit programs, contributions to your employees’ retirement plan accounts are also deductible.

Discover these other ways in which you can cut your business income tax.

Tax-Saving Tips

Reducing your tax doesn’t have to be difficult, you just need to know the secret tips and tricks that can help your business save money.

Implement these 8 tax-saving tips now into your business and see how much money you can save.

Take control of your finances with these helpful tools that let you check your credit score, calculate your income, and budget for your business investments.

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