December 3, 2022

How to Reduce Your Taxes as a Small Business

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Tax season is nearly upon us, and that means that it’s time to start getting things in order if you haven’t already. There’s a lot that can go into the taxes a small business has to pay, so it’s never a bad idea to get a head start. That’s not the only thing you should be thinking about though. You should also be thinking about what you can do to reduce the amount you have to pay in taxes.

Start a Retirement Plan

Everyone should have a plan for retirement. It’s never a bad idea to start planning for the future. You don’t have to wait until then to realize the benefits of retirement plans, however. Setting up a retirement plan and contributing to it as an employer can be a good way to reduce your business taxes. You can even use it to amp up the contributions to your own retirement as the owner. Maxing out your contributions as both the employer and an employee of your small business could see as much as $58,000 through a SEP IRA going into your retirement account every year.

Offering Health Benefits

Health benefits are becoming an increasingly expected employee benefit. It’s no wonder, given how relatively affordable health care tends to be for employees when it comes through their employer. It’s not just something that can benefit your employees though. Having a health insurance plan that you can offer your employees can help reduce your taxes. Your business may qualify for a tax credit if you offer group health insurance. Think carefully about the sorts of plans that make the most sense for you to offer and how to go about doing it. That way both you and your employees can reap the benefits.

Be Strategic about Hiring

There are a few things you can do when it comes to people who do work for your company to reduce your taxes. For starters, there are tax benefits you get when you hire family members. If you hire a spouse, for example, you don’t need to pay unemployment taxes. You don’t have to pay employment taxes on children you hire either. Then there’s the matter of employees vs independent contractors. If you contract work out to independent contractors, you’re off the hook for employment taxes for them either.

No one likes paying more taxes than necessary, so it’s always good to figure out what you can do to reduce your taxes. In many cases, it comes down to how you choose to spend the money your business brings in. In other cases, it can be strategic employment decisions. Remember, you can always consult a tax professional who specializes in business taxes if you ever have questions or are looking for more ideas on how you can optimize your finances in regards to the taxes your business owes.

Click here for more strategies that can save your business time and money!

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