1. Accelerating cash collections can help small business owners increase profits on their current year’s tax return, while deferring collections can keep taxable profits lower and delay tax payment to the following year.
2. Small business owners can also accelerate or defer deductible expenses to offset income and reduce taxable income in a more profitable year. – For companies expecting higher profits next year, it is recommended to defer deductible expenses to next year to offset the increased income.
– For companies expecting lower profits next year, it is advisable to charge deductible expenses in the current year to offset this year’s profits.
– Credit card payments are deductible in the year they are charged, not when they are paid.
– Running reports to assess current-year profitability and project next year’s profitability can help make informed decisions to decrease overall tax bills.
– Setting up a 401(k) plan for employees can attract top talent and provide tax advantages for the company. Tax credits are available to help cover the costs of starting a 401(k) plan, and contributions made into these plans for employees are likely tax-deductible.
– Business owners can contribute up to $20,500 of their own salary to the company’s 401(k) plan, potentially lowering their personal tax bracket and reducing tax owed. 1. Making additional contributions to employees’ retirement savings plan can lower a business’s tax burden and qualify as a tax-deductible business expense.
2. Charitable contributions not only support a business’s role as a good corporate citizen, but can also provide a tax deduction, especially if scheduled at the end of the year to offset higher profits.
3. Researching giving days in your state can help maximize the impact of charitable donations by taking advantage of potential matching funds.
5 Income Tax Strategies Every Small Business Owner Should Know
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