Taxes can be an annoyance for freelancers and small business owner. Next thing you want to do is pay more of your earned income to the government. There is various way to reduce your taxable responsibility as a business owner and keep more of that revenue for yourself. You can consider some of the following strategies listed below to reduce your tax burden. Before taking an action on these strategies try to consult a Tax professional for an advice before taking a step.
Employ Family Member
One of the best ways to reduce taxes for your small business is to employ a family member. You can hire your children, a Small business owner can hire their children to reduce their taxes. Business owners are able to pay a lower marginal rate or abrogate the tax on the income paid to their children. It’s important to point out earnings need to come from justifiable business purposes. This strategy does not stop in hiring your child. You can also hire a spouse. It depends on aid they have through another job you may be able to put aside retirement savings for them, hence reducing your taxable responsibility.
Change Business Structure
As a small business owner, you don’t have the aid of an employer paying the portion of your taxes if your business is taxed as a Limited liability company, you still have to pay those taxes. You are on the hook for the entire amount of Medicare and social security Taxes. Those amounts only increase an already high tax bill. In a certain way, you can abrogate the employer half of those two tax responsibilities. There are the various thing to observe in the points, such as paying yourself a treasonous salary and other associated risk, although it can be a good way to reduce your taxable responsibility.
Save Money for Health Care Need
This also the best way to reduce tax for small business and freelancers is by putting money aside for healthcare needs. Saving money for unexpected or future health care needs is crucial because medical costs continue to increase. You can achieve this through health saving account. As medical cost high, many businesses look to lower the cost of health insurance, I encourage every freelancers and business owner to research employ a HAS. By employ HAS, the business and employees can reduce taxes and potentially associated medical cost.
File the Right Tax Forms
Freelancers can decide to operate as one several business entities such as Limited Liability Company, Partnership, Sole proprietor, Corporation. Each of those options makes use of different tax form for reporting purpose, make sure you know which one to apply. To work as a freelancer has a lot of benefits, including flexibilities and limitless income potential. It is how much you are able to reinvest and multiply to create the lifestyle you desire. It is how much you make that matter at the end of the day.
Deduct Travel Expenses
Business travel is fully deductible, although personal travel does not enjoy the same benefit. There are various ways to economize travel to save on business taxes. You can join personal travel for a justifiable business purpose. If you travel a lot for both business and pleasure, you may be able to reduce your taxes.