Business Tax Breaks You Can’t Afford to Overlook
Businesses in various niches are run on different profit-making plans and strategies. One thing remains common across all plans, though: the tax bill must be kept to a minimum. Every business has an obligation to pay a certain amount of money to the IRS depending on such factors as business type, amount of sales and profit, number of employees, product type, and several other IRS-determined elements. That is not to say businesses have no say on the amount they part with at the end of a financial year. By taking advantage of these tax breaks, any business can cut back on their taxes without compromising their operations or objectives:
- Charitable contributions
While most businesses remember to report their cash charitable contributions, non-cash donations are often overlooked. This can prove damaging to the business’s bottom line in the long term.
Given the contribution valuation hassle is the reason most businesses don’t capitalize on this deduction, it is worthwhile to have a professional accountant by your side. Thankfully, you don’t have to recruit one as an employee if you are looking for a tax professional. Instead, you can find an independent contractor like this accountant NYC and use their services on an ad hoc basis for a lower wage bill.
- Self-employment tax
Self-employment tax, which includes social security and Medicare taxes, is shared equally between employees and their employers. The IRS allows employers to treat their share as a business expense and deduct it accordingly. If your business isn’t doing it already, it is never too late to adopt the strategy and trim your tax bill.
- Home office
Many business owners don’t know it, but working from a home office has more benefits than simply evading office rent and transportation costs. The IRS allows you to deduct any workspace used regularly and strictly for business operations as a home office expense. This is whether the office is in your home or rented. All you need to do is take measurements of the space and use them in preparing the workspace diagram that you will provide to the IRS during an audit.
- Make equipment purchases
Purchasing business equipment that will be used for production will directly reduce your tax obligation and potentially get your business in a lower tax bracket. For instance, if you find out you owe $78,000 to the IRS before the business year ends, a $10,000 machinery purchase will lower your tax bill by $10,000. Consequently, you will fall in the lower-rate $50,000 – $75,000 tax bracket.
This is one of the oldest tricks in the book but one that can prove detrimental if abused. It is advisable to calculate your purchases’ return on investment or risk losing more money in the name of lowering your business taxes.
Taxes are inevitable, and these are some of the tried-and-tested methods to keep them low and increase your profits. Make sure to include them in your tax strategy. Additionally, consider consulting a tax specialist for further advice and the assessment of the viability of the above tips.