No one likes to think about taxes, let alone paying for them! And taxes can be more stressful, especially if you’re a small business owner. You work hard day and night to run and grow your business, and the last thing you want to do is give more of your hard-earned business income to the government. Fortunately, there are many tax savings strategies to minimize your tax liability as a business owner. Consider some of our tips below if you need to reduce your taxable income.

Hire A Family Member

Employing one of your family members is one of the best ways to minimize your small business taxes. The Internal Revenue Services (IRS) allows various options with the potential benefits of saving income from taxes. You can even hire your children. For instance, sole proprietorships are not required to pay social security and Medicare taxes of a child’s wages or the Federal Unemployment Tax Act (FUTA) tax. The IRS also allows the small business owners the choice of hiring a spouse to reduce taxes. Depending on the benefits they may get through another job, you may also be able to put aside retirement savings for them.

Get A Retirement Plan

A small business owner gives up a 401 (k) plan matched by an employer. However, many retirement account options increase retirement savings and reap valuable tax benefits. For instance, with the one participant 401 (k) plan, the IRS allows you to put away up to $57,000 in total retirement contributions. There are multiple different retirement plan options for business owners on the IRS website as a tax savings strategy.

Start Saving For Healthcare Needs

Another method to reduced small business taxes is by putting aside money for healthcare needs. Medical costs continue to maximize, and while you and your family may be healthy now, saving money for any unexpected future healthcare needs is essential. You can do this through a Health Savings Account (HAS) if you have an eligible high-deductible health plan. The savings come in three key ways, otherwise known as the triple tax benefit: your contributions grow tax-free, are pre-tax, and withdrawals for eligible medical expenses are tax-free.

Adjust Your Business Structure

Small business owners do not enjoy the benefit of having an employer pay the portion of their taxes. They are on the hook for the entire amount of Medicare taxes and social security taxes. If your company is taxed as a Limited Liability Company (LLC), you are still required to pay those taxes. Although, in some certain circumstances, you may be able to reduce the employer-half of those two tax responsibilities. This can be a wise switch for some small businesses. However, there are many things to consider in such a switch, such as paying yourself a reasonable salary and other relatable risks, but it can be a good way to minimize your taxable liability.

Withhold Travel Expenses

If you are one of those who travel a lot, you may be able to minimize your business taxes. Business travel is completely deductible, but personal travel does not have the same benefit. However, small business owners can merge personal travel with a justifiable business purpose to reduce business travel. Any frequent flier miles received from business travel can also be redeemed for personal travel later on.

Professional Bookkeeping Services

With critical planning, you can minimize your taxable income as a small business owner and keep more of your hard-earned money functional for you. Just remember first to consult a tax professional to ensure you qualify for the potentials savings discussed above.

For a consultation, you can check us out at Books On Fire. We offer qualified and professional bookkeeping services and other accounting and consultation services as well. Call now for a free consultation!