Money-Saving Tax Strategies

To reduce tax liabilities, small business owners should be familiar with the tax benefits and deductions that are available to them. Even though there’s never been a foolproof plan on how to run a successful business, one common goal has always been saving money – no matter what type of business you’re in. And with these methods, you can save your small business some extra money during tax season.

#1 – Deduct Startup Costs
Creating a small business can be time consuming and expensive – no question about that. However, the IRS allows you to deduct a maximum of $5,000 from your startup costs within your first year of business. This will allow a reduction in both your income and self-employment taxes, which also includes Social Security and Medicare taxes.

Generally, your startup costs include buying equipment, supplies, and any operating fees – experts say that the rest of your startup costs should depreciate over 15 years.

#2 – Take Advantage of Special Depreciation Rules
Typically, you can’t deduct the entire cost of large items for your business within that same year; you’re required to deduct a portion each year on your tax return as the item gradually depreciates. There is a way around this – you can use a special depreciation allowance, which lets you deduct 50% of an item purchased within the same year, and it applies to just about any tangible property.

There is the possibility of deducting a full 100% of property costs during the year with what is called a Section 179 Deduction. It can be used – up to $500,000 – for tangible properties purchased for your business in the same year. The only drawback is that residential rental property doesn’t qualify.

#3 – Commit to a Retirement Account
After your business is operational, and income starts to flow, you can save more of your money from being taxed by putting it in an Individual Retirement Arrangement (IRA) account. With an IRA account, you can contribute up to $5,500 for the year – tax free. There are also other retirement accounts available for self-employers in which you can contribute both as an employee and employer – easily doubling your amount saved.

#4 – Deduct Expenses from Home Office
You could deduct some living expenses as a business expense if you’re working from your home either part-time or full-time. There are qualifications that have to be met in order to classify your space as a home office. But if you meet those requirements, you can potentially deduct utilities, mortgage interest, insurance, depreciation, and repairs.

Check out our other blog for more information: Home Office Deductions

There are many more ways small businesses and owners can save money with their taxes – speak with your local tax professional about your specific situation and inquire about your available options. If you need more time to gather all of your deductions before filing, get an extension of time with a tax extension.

ExpressExtension offers a quick and easy online solution to filing your extension form directly to the IRS. Within minutes, you can e-file a business, personal, or exempt organization extension and get instantly approved for up to six months of extra filing time.

Our super support team of live professionals – in Rock Hill, South Carolina – is ready to assist with your e-filing experience. Feel free to contact us at (803) 514-5155, Monday through Friday from 9 a.m. to 6 p.m. EST. And we happily accept email requests 24/7 through our [email protected] account.