Are you a business owner in New York that’s looking to pay less in taxes each year?
In this article, I’m going to share with you 8 top tips small business owners can use to help them save thousands of dollars in taxes each year.
Even just a few of these tax saving tips and strategies have the potential to save you a lot of money in taxes (especially if you live in New York).
If you prefer, you can also check out the video version of this article here:
Choose the right entity for your business
There are many different entities to choose from:
- S Corps
- Sole proprietors
- And so on…
It’s very important to choose the right entity to maximize your tax savings.
How do you know the right business entity for tax savings?
It depends on your unique circumstances. Not everyone’s the same. So it’s usually a good idea to speak to a professional first. If you’re interested in seeing how I can help, please watch this short video.
Once you choose the right entity, you have to make sure you hone in on the right strategies and make the proper moves to benefit from tax savings in that business entity.
This may include deducting the necessary expenses or taking the right amount of salaries.
Making sure to deduct your expenses
I can’t tell you how many times I’ve spoken to business owners that tell me they’re not deducting their expenses.
You want to make sure you’re deducting all your expenses, I know many expensive business owners that pay expenses out of pocket.
It’s important to set things up in the right way to make sure you deduct the expenses that aren’t being paid through the business.
Take the optimal salary and distributions to minimize taxes
A lot of business owners will take too high of a salary and pay lots of payroll taxes and others won’t take enough of a salary and they can also end up overpaying in business taxes.
Making sure to take the optimal salary would be a very important strategy.
Know your tax liability and set it aside
If you don’t know how much your tax liability is going to be you might not be able to set it aside. This can cause problems because if you don’t pay your taxes on time, you’re going to pay a lot of penalties.
So it’s a good idea to make sure you know what your tax liability is going to be and set that money aside.
Set up the right retirement plan
A lot of people don’t realize this but there are many different retirement plans out there that can save you thousands on dollars in taxes each year and at the same time help you prepare for a comfortable retirement.
Shift income to persons in lower tax brackets
The more money you earn the more money in taxes you have to pay.
To reduce how much you pay in taxes, you may be able to shift money to a relative in a lower tax bracket (such as a spouse or children).
If you do it the right way, you may be able to avoid paying payroll taxes on money that was paid to your relative.
Earn Tax Free Income
This is also known as the augusta loophole.
If you set things up in the right way and document things accordingly, you can get tax-free income from your home.
Deduct Medical Expenses
One of the big challenges is that medical expenses for most people are not deductible.
They have to be an enormous amount, on average over 15-20,000 dollars to be able to deduct it, if you’re lucky.
Rental Property (Accelerating Deductions & Depreciation)
I’ve seen many business owners with rental properties that are able to accelerate the deductions and rather than waiting over 30 years, they get a deduction now.
It’s important to get the deduction now when the deduction is worth a lot more and when your in a higher bracket during your earning years.
To be able to get that deduction now is very important and this on its own can help you potentially save $100,000, $200,000 or more in taxes.
Reduce your New York City and State Business Taxes for out of state sales
Did you know that if you sell products that are shipped outside of New York City and State, there is a good chance that you don’t have to pay taxes on those sales if you apportion your out of state sales properly. Most New York businesses miss out on this loophole.
It’s important because many business owners pay thousands and thousands of dollars in taxes on products, when they could be saving that money instead.
More Tax Tips
For more information on how to save $10K, $20K, $50K or more in taxes each year by making one simple change to your finances, check out this video here.