How can Entrepreneurs Save Money on Taxes?

by Agro Accounting CPA Accounting for Artists, Freelancers & Creative Com

‘Entrepreneur’ is the word used for the modern-day business person who is vying to provide solutions for problems that have not been addressed in a long time or have not even come up yet. No doubt, entrepreneurs do revolutionary things but, in the eyes of the IRS, they are a business that needs to pay taxes. Taxes seem a little harsh on such hard-earned money! The IRS also understands this. That’s why you have a range of leverage that can actually help you save money on your tax preparation for entrepreneurs.

Three Most Effective Ways Entrepreneurs can Save Money on Taxes:

1. Business deductions

If you are running a business or are self-employed, you have a range of business deductions available to you, which allows you to write off various costs. For example, you can write off expenses for business travel, equipment purchase, office supplies, and much more.

Most businesses or self-employed individuals are aware of the typical expenses, yet the Qualified Business Income (QBI) deduction is also available to you. It came into effect in 2018. It allows a sole proprietorship, partnership, or S-corporation to deduct 20% of its qualifying business income if it passes income and deductions down to shareholders, partners or owners, for them all to report on their personal tax returns.

2. Start a retirement plan

Starting a retirement plan is one of the most sensible ways for a business to save money on taxes. Funding a retirement plan recognized by the IRS allows deferment of taxes on earnings until you withdraw the earnings.

There are many retirement plans that allow you to save money on taxes. The most common retirement plans used by businesses are the IRA, 401(k) and 403(b). You can visit the IRS’ website to find out the details of other plans that can be used in your tax-saving strategy for your new business.

3. Tax credits can save you tax money

Tax credits are another great option that can help you reduce your taxable income. These credits are provided by the federal government to a business in order to encourage it to do things for the greater good. For example, you can use tax credits for going green, providing health coverage for employees, and providing additional services to disabled employees.

These are the three most effective ways to save money on taxes. They can save you money, but it is very important to work with an expert accountant for entrepreneurs or small businesses in order to claim your tax savings appropriately. Misinterpreting or ignoring tax laws can result in audits and penalties. So, remember, it is always a good idea to consult with your company accountant for taxes to find ways to reduce the tax liabilities of your business.