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5 Major Things You Should Know About Small Business Tax

Did you know that there are almost 31 million small businesses in the United States of America? Small businesses are the cornerstone of the United States economy and they provide an avenue to grow your wealth and live the American Dream. One big aspect that can hold your small business dreams back from becoming a reality is small business tax.

There are a number of small business tax deductions that will save your small business money to reinvest into further growth and success. It is a wise move to learn the ins and outs of taxes on small business in order to maximize your business’s potential.

Luckily, you’ve come to the right place for some great tax deduction tips that will help you take the burden of small business tax a little easier. Continue reading to learn more.

1. Employ a Family Member

One great way to help out with your small business tax is to consider hiring a family member to work for you. There are tons of great options through the Internal Revenue Service that will help shelter you from hefty small business taxes and reap the benefits of tax deductions.

One method of taking advantage of those tax deductions is hiring a member of your family. This even includes hiring your children to work for your small business. Hiring family members to work for your small business helps by lowering the marginal rate. This means that you won’t have to pay any taxes on the income that gets paid to your children or family members.

If you hire one of your children you will be exempt from paying Medicare and Social Security taxes on behalf of your child. One thing that you should be aware of is that your child’s earnings need to come from justifiable business.

You can also lower your small business tax by hiring your spouse to work for your company. This would shelter your spouse from having to pay Federal Unemployment Tax. If your spouse has a different job on top of working for your business then you can use that untaxed income to put towards their retirement. You can learn more here.

2. Start a Retirement Plan

Starting a retirement plan is a great approach to help with the small business tax that you face as a small business owner. When you choose to start your own business you lose out on the opportunity to access a 401(k) retirement plan through your employer. This might sound like a negative but it results in tax benefits that you can reap.

An example of this is the fact that the Internal Revenue Service allows you to up to $57,000 into your retirement plan without paying taxes on it. This could be through a Roth IRA or through a 401(k). It could also go into a Simplified Employment Pension plan.

These are all great options if you’re looking for a way to save money on your small business taxes.

3. Save Money On Your Healthcare

Another great way to help save money when it comes to paying your small business taxes is by putting money aside for your healthcare needs. This is important on the basis of how expensive healthcare is becoming in the United States, but there are also great tax benefits that you’ll stand to gain.

Even if you’re currently in great health it is always smart to put money away in case an accident happens and you need money for medical bills. A great approach to take is by getting a Health Savings Account.

Using a Health Savings Account will allow you to save money for medical bills while helping to decrease the taxes that you pay on that money. Your contributions aren’t taxed prior to adding them to your HSA account. From there, they grow in a way that is free from taxes and they also reduce the amount of taxes that you pay on your medical bills. It is a win-win-win situation.

4. Change the Structure of Your Business

One thing that scares people away from starting and running their own business or acting as a freelancer is that you no longer have your employer paying a portion of your taxes for you. This means that all of your Social Security and Medicare taxes come out of what you make.

These taxes still need to get paid even if your business operates as a Limited Liability Company. The good news with creating an LLC is that you can eliminate part of those employer-paid taxes which will help you save more money on your small business tax.

There are a lot of things to consider before you make the move to forming a Limited Liability Company, like how much to pay yourself, but it is a great option to think about implementing if you want to find creative ways to save money on your taxes.

5. Deduct Your Travels

If you’re running a small business then it is possible that you’re traveling a lot for work. Travel fees add up quickly but if they’re vital for your business’s success and growth then you can deduct these travel expenses from your taxes. Business travel is one of the few expenses that are completely deductible with the Internal Revenue Service.

You also have the ability to combine your personal travel into this business travel if you have a justifiable business purpose behind your personal travel expenses. Another great benefit that comes with this is the accrual of frequent flyer miles. You can use your business frequent flyer miles for personal travel without needing to pay taxes on those transactions.

Get Creative With Your Small Business Tax Options

When it comes to running a small business, every amount of money that you can save and reinvest into your company is a victory. One area where you should get creative is with your small business tax. Consider hiring a family member to work for your business as a way to save money on taxes. You should also consider deducting your travel expenses from your taxes to save money.

For more helpful and informative articles, explore more of our blog today.

Read Also: What You Need to Know About the Different Types of Back Pain

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