7 Commonly Used Business Tax Strategies For 2023

1. 7 Commonly Used Business Tax Strategies For 2023

2. While it might be tempting to overlook tax planning in favor of other tasks that may seem more important or timely as a small business owner, this could be the quickest route to paying more in taxes. Planning your business taxes with an intelligent strategy – this may or may not involve the use of an accountant or other tax professional – could help you save big on income taxes, and reduce your annual tax bill. Below are 7 commonly used approaches to tax saving for small businesses:

3. 1. Accelerate expenses and defer income By delaying the sending out of invoices to the first quarter from the fourth, you can slow your business income, and by purchasing larger items before the year is out, instead of right away, you can help capture expenses more effectively. Deferring income to the next year, means that any taxes paid on it won’t be due until the following year, and with major expenses listed now, your current income can receive a deduction rather than income in the future. Working with a tax professional can help you time your income and expenses effectively.

4. 2. Maximise depreciation Helping to reduce a small businesses taxable income, the accounting technique of depreciation is usually spread out over a period of years, but there are federal laws that permit businesses to depreciate as much as 100% of property that qualifies the year it was purchased. However, it’s worth noting that for any property put into service during 2023 and any subsequent years, the tax deduction falls to 80% of property that qualifies. Computers, machinery, vehicles, software and equipment may well qualify, but you’ll need expert help to guide you more confidently down the depreciation path.

5. 3. Make use of the deduction for qualified business income In a law identical to the one mentioned above, a new strategy now allows businesses to deduct their business income by up to 20%, but this is only applicable for single member LLCs, S-Corps and sole proprietorships (pass-through businesses, in other words). While C-Corps are not entitled to the qualified business income deduction as a result of not being taxable as a flow-through entity, they may be able to change to a S-Corps. However, the restrictions typically applied to S Corporations in terms of shareholders, may hinder any prospect of future growth, so again, expert tax advice is advisable.

6. 4. Set up retirement plans In exactly the same way as retirement plans can yield tax savings for individuals, so can they for small businesses, and if you don’t yet have one, it might be worth talking to your accountant or tax service provider about setting one up. If you’re a corporation owner, you may be permitted to contribute as much as 25% of your salary to a plan such as a 401(k), which defers taxes. If you’re a sole proprietor, 20% of your earnings may be put into an account such as a tax-deferred SEP-IRA.

7. 5. Offer benefits to employees Attracting and retaining the best new recruits for your business is made easier with benefits like health insurance that are company-sponsored, or tuition assistance and transportation benefits among others. But they can also enable your business to reduce its taxable income with a deduction. Additionally, offering such benefits to employees doesn’t increase the cost of employment tax.

8. 6. Fund a health savings account Health insurance plans that have a high deductible, may enable business owners to fund an HSA, or Health Savings Account. A common and popular strategy for making tax savings, any contributions you make to a HAS are able to be deducted from existing income, and grow tax-free in the account, along with qualified health expense withdrawals.

9. 7. Think about relocating As some states such as Alaska, Oregon and Montana (among others) have business taxes that are significantly lower than others, if relocating is a possibility for you, it might be worth considering. For more detailed information about tax saving strategies, and to start saving more money in taxes as a small business owner, seek help from a qualified tax professional, today!

10. At Heyer Inc, we proactively assist our individual and small business clients in meeting their goals. Our key area of focus is ensuring that our clients remain compliant with federal and state tax laws by providing them with high quality accounting and tax services Miami. If you are looking for an individual accountant in Miami, heyer inc would be a right option.