Running a small business is a big feat because many owners may have to operate on a shoestring budget. Every dollar counts when you have to navigate through competitive markets and razor-thin margins.
The last thing you want to encounter is tax troubles, Even if you stay ahead of filing and deadlines, you will want to save as much on taxes as possible.
High tax bills can cut your profits and affect the business’s bottom line in the long run. Thankfully, there are realistic ways for small business owners to cut down their taxes. Here are some hacks you can rely on.
Keep close tabs on your spending
Spending on equipment, goods, and services is an integral part of running a business. You can claim specific deductions for expenses, depending on your business structure.
Ensure you keep a close tab on your spending with receipts for every single expense. Maintaining them in one place enables you to claim relevant deductions at tax time. Also, there is hardly a chance of getting them misplaced or tossed.
Deduct your home office
Small business owners often operate from home offices but fail to deduct home office expenses. These include mortgage interest payments, repairs, insurance, and utilities like internet service.
You have to consider the portion of the living space you use as a home office to calculate the exact amount of deduction. But the effort is worthwhile as you end up saving a significant sum with this deduction.
Utilize carryovers strategically
Being a small business owner, you may not afford an in-house accounting team to guide you about carryovers. Experts at Del Real Tax accounting firm suggest taking up tax preparation advisory services to create a strategic plan.
They can help you pick the credits and deductions left in one tax year and carry them over to future years. These include items such as net operating losses, capital losses, and charitable contribution deductions. Track them and utilize them for lowering your tax bills year after year.
Seek penalty relief if applicable
There is always a possibility of incurring an IRS penalty despite following the best tax recommendations. Look for penalty relief options in such circumstances. Some penalties, like ones for missing the deadline or failing to file a return, are eligible for relief.
You can claim it if you tried to follow the requirements but missed out because of situations beyond your control. A tax specialist can help you address such concerns and get the relief you deserve.
Look for tax breaks for going green
Small business owners can save on tax bills by going green with eco-friendly practices and investments like solar installations. Such initiatives have dual benefits as you end up with a reputation for sustainability besides getting tax breaks.
Not to mention, you can cut down expenses with energy savings down the line. It is a win-win situation for business owners who want to build a thriving organization.
Embracing these hacks is the wisest thing that small entrepreneurs can do. You get to cut down your tax bills and build a sustainable business in the long run.