6 Tax Tips to Save You Thousands as Small Business Owner

 In tax planning

Taxes are your biggest expense in life so strategic tax planning is a must, pay your legal share and not a dollar more. 

The tax code is over 75,000 pages and the wealthy use every page to legally avoid taxes (and you should too). 

Here are 6 tax tips that can save thousands:

1) Business Expenses

Business owners can claim many deductions and business expenses that salaried employees cannot, such as: 

  • Travel 
  • Supplies 
  • Advertising 
  • Vehicle expenses 
  • Home office costs 
  • Internet & phone bills 
  • Health insurance premiums 
  • Education & professional development

2) Agusta Rule (Section 280A)

augusta-rule-tax-loophole-business-expenseAllows homeowners to rent out their homes for up to 14 days per year without having to pay tax on rental income. If you own a business, you can host a team retreat, party, event, or meeting at your home, and rent it out to your own business. If you are a small business or startup owner, then the Augusta rule is, without a doubt, a tax exemption you should know about. Bring it up the next time you have a tax planning discussion with your CPA. 


3) S Corps

An S corporation can help you reduce self-employment taxes. S corps allow business owners to take a reasonable salary from the company’s profits, so the 15.3% self-employment tax is minimized.

As an example say you are the sole shareholder of an S corp & you earn $100,000 in income. If you take a salary of $50,000 & distributions of $50,000, you’ll only pay payroll taxes on the $50,000 salary. This could save you thousands of dollars in taxes.


4) Hiring Your Children

You can save money and teach the next generations smart money tactics if you hire them right. If you own a business and have kids under 18, you can pay them $13,850 tax-free, plus deduct it from your taxable income. When you hire your child, this is a business expense and you can deduct it from your taxable income, lowering your tax liability.

Children can perform tasks such as administrative work, social media management, or other age-appropriate responsibilities. Your child will owe $0 in taxes and you legally avoided tax on $13,850. They can invest $6,500 of that in a tax-free ROTH IRA.  Check out this article in Entrepreneur for details about hiring your kids that are under or over 18. 

5) Section 179 Tax Deduction

section-179The IRS Section 179 Tax Deduction allows business owners to write off the entire cost of a vehicle used for work (cars, trucks, SUVs, vans, etc.) For tax years beginning in 2022, the maximum Section 179 expense deduction is $1,080,000.

6) Primary Residence Exclusion (Section 121)

Homeowners can exclude $250,000 of capital gains from the sale of their home ($500,000 if married). If you sell your primary residence for a profit, you don’t pay taxes on the gain, up to these amounts.

There is no requirement that proceeds from a home sale be used to purchase another home in order to claim the exclusion.

However, the exclusion is tailored to deny similar tax benefits to investors who buy homes for rental.

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