Small Business Tax Strategies: Smart Moves to Keep More of Your Profits

Our Impact Team
Feb 27
3 min read

As a small business owner, every dollar counts. One of the smartest financial moves you can make is implementing tax strategies that minimize your liabilities and maximize your profits. Proper tax planning ensures you are not overpaying the IRS and helps you retain more of your hard-earned money.

Tax Strategies

Choose the Right Business Structure

Your business entity determines your tax obligations. The right structure can significantly reduce your tax liability.

Common Business Structures:

Sole Proprietorship: Simple but exposes you to self-employment taxes.
Limited Liability Company (LLC): Offers flexibility in taxation and liability protection.
S Corporation (S-Corp): Allows business owners to avoid self-employment tax on a portion of income.
C Corporation (C-Corp): Best for larger businesses but comes with double taxation.

Smart Move:

Consult with a tax professional to determine the best structure for your business to optimize tax savings.

Check out our One Pager to know What Business Type is Right for You.

Take Advantage of Business Deductions

Small business owners can deduct numerous expenses that directly reduce taxable income.

Common Deductions:

Home Office Deduction: If you use part of your home exclusively for business, you may qualify.
Vehicle Expenses: If you use your car for business, mileage and depreciation may be deductible.
Business Meals and Entertainment: Deduct 50% of meals directly related to business activities.
Marketing and Advertising: Deduct expenses for promotions, branding, and online marketing.
Office Supplies and Equipment: Includes computers, software, and office furniture.
Professional Services: Fees for accountants, attorneys, and consultants.

Smart Move:

Keep detailed records of all expenses and retain receipts to substantiate deductions.

Visit the IRS website to explore detailed information on business credits and deductions, including guidance on how to claim them on your tax return.

Maximize Retirement Contributions

Contributing to a retirement plan not only secures your future but also reduces taxable income.

Retirement Options for Small Business Owners:

Solo 401(k): Ideal for self-employed individuals with no employees.
SEP IRA: Allows employer contributions up to 25% of salary.
SIMPLE IRA: A great option for small businesses with employees.

Smart Move:

Maximize contributions to reduce taxable income while growing retirement savings tax-deferred.

Maximize Your Tax Savings! Let us guide you—reach out for support today.

Leverage Tax Credits

Unlike deductions, which reduce taxable income, tax credits offer a dollar-for-dollar reduction in taxes owed.

Small Business Tax Credits:

Work Opportunity Tax Credit (WOTC): For hiring employees from certain target groups.
R&D Tax Credit: For businesses engaged in research and innovation.
Health Care Tax Credit: Available to small businesses that provide employee health insurance.
Energy-Efficient Property Credit: For investing in energy-saving business assets.

Smart Move:

Review available tax credits annually to ensure you’re not missing potential savings.

Visit the IRS website to explore detailed information on business credits and deductions, including guidance on how to claim them on your tax return.

Defer Income and Accelerate Expenses

Shifting income and expenses strategically can reduce taxable income in the current year.

Smart Move:

Delay income: If possible, push income to the next tax year to defer taxes.
Prepay expenses: Pay upcoming business expenses before year-end to reduce taxable income.

Hire Family Members

Hiring your spouse or children can provide tax savings while keeping income within the family.

Benefits:

Wages paid to children under 18 may be exempt from payroll taxes.
Contributions to your spouse’s retirement plan increase tax-advantaged savings.
You can shift taxable income to a lower tax bracket family member.

Smart Move:

Ensure all payments are reasonable and documented to comply with IRS regulations.

Maximize Your Tax Savings! Let us guide you—reach out for support today.

Keep Proper Financial Records and Work with a Tax Professional

The IRS requires businesses to maintain accurate financial records to substantiate deductions and credits.

Best Practices:

Use accounting software like QuickBooks to track income and expenses.
Maintain separate business and personal bank accounts.
Keep detailed records of all transactions, including invoices and receipts.

Smart Move:

Work with a tax professional to ensure compliance and maximize deductions.

How We Can Help

Proactive tax planning is essential for maximizing profits and minimizing liabilities. At Loomis Reddick & Bishop, we are dedicated to helping small business owners navigate tax laws, identify deductions, and implement smart tax-saving strategies.

Contact Us

Contact the Loomis Reddick & Bishop Impact Team today for tax guidance and tailored financial strategies!

Don’t let high taxes eat into your profits—start planning today and keep more of what you earn!

Schedule A Free Consultation Now