When Tax season is around Small Business Owners, start worrying about paying big Taxes. In whatever form the company is registered, it is bound to pay its taxes upon the yearly income. Rather than worrying about paying tax on your small business income, you should start figuring out ways to reduce tax legitimately in the best possible manner. For this legitimate tax mitigation, entrepreneurs hire Finance professionals to guide them through the process. However, Finance experts have to be paid for the service they are providing. Therefore, this becomes an additional cost to Entrepreneur.
A small business owner himself must be aware of all tax tips to reduce income tax to its minimum. If a business owner himself knows ways to legitimately reducetaxes, he takes actions accordingly the whole year. If he is not aware of legal tax mitigations and hires a professional at year-end for guidance, he might have guidance at that time but the right time for actions has passed.
Firstly, a small business owner must keep his personal and business expenses completely separate from each other. He must keep arecord of every single business expense along with transaction proofs such as bills, receipts, etc. Recording every single business expense would reduce the taxable income to its minimum, and you would have a legitimate tax saving.
Moreover, a small business owner must be aware that tax authorities allow business-related car expenses named as mileage allowance. Hence, he must keep a clear record of his car mileage on business trips. He must not mix his personal car expense with business car expenses.
Another way of reducing tax payable upon the business income is that the owner hires his own kids in his business. This would have two benefits. The job would become a starting point for the kids career, and no tax would have to be paid on his income. For the business, it would become an expense but for the family this would become an income with zero tax.
Home Office deduction is also a legitimate way for greater savings. Instead of renting a separate building for the small business, entrepreneurs may use a portion of their house as an office and claim home office deduction on business use of the home. However for this claim there must be a clear line between home and office space as well as related expense for proper evidence of the claim.
Contributing into a health savings account also allows small businesses some tax deductions. The amount that is being contributed in some health savings plan is completely tax deductible. This allows health coverage with no tax payment upon the specific part of theincome that is being contributed.A lot more ways are available of thelegitimate tax deduction for small business owners. All that is required to avail legal way of tax deductions is that the owner must be aware of every single method. By applying his own knowledge, a taxpayer can wisely reduce his taxes to the minimum and remaining with a better after-tax income at year-end, escaping all tax-related headaches.
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