Five Tax-Saving Tips for Small Businesses
Tax time is the one time that businesses can really turn income lemons, such as nonpaying customers and personal loans for business expenses, into lemonade by using the tax deductions and business tax credits available under certain circumstances. Here are five tax-saving tips that will help your small business this tax season.
Gather Up All of Your Unpaid Invoices
Whether they are from this year or a previous year, you can write off unpaid invoices that you have not previously claimed during tax time. If you missed this deduction from previous years and have a lot of unpaid invoices sitting around collecting dust, then you can get really nice tax deductions to lower your taxable profit without any loss of actual income for the current year. If this is your first year in business, make sure you keep and claim these invoices on your small business taxes.
Turn to Household Bills for Potential Tax Deductions
If you work from home and have an office that is a dedicated work space for your business, you can write off part of your mortgage payment, insurance costs, and utility bills on your business return to get more tax deductions. If you use your personal car for business purposes, you can write off a portion of your car payment, insurance, and maintenance costs too. Also, don't forget to write off a portion of your Internet and cell phone bills if you use them for business purposes, especially if you have a dedicated business line.
Write Off the Interest on a Personal Loan
If you used a personal loan to fund start-up or operating costs for your business, then you can write off the interest as a business expense on your return to get bigger tax deductions. Although it is wise not to put yourself into personal debt to fund your business, if you are already in this situation, use it to help yourself and your business at tax time.
Bill for December Services in January
This will allow you to defer claiming that income until the next tax year, which can be especially advantageous if doing so will keep you in a lower tax bracket. This is one way to reduce your tax payment for the year without tax deductions or business tax credits. The risk you take here is bumping yourself into a higher tax bracket next year, but you can always employ this tip again for next season if it will help lower your tax bill.
Don't Forget to Deduct Start-Up Costs
If this is your first year in business or you have carry-over start-up costs that you still have not claimed, then this is a good time to do so and grab a few extra tax deductions for your business. The only downside is that you may not be able to deduct all of your start-up expenses for the first year, because capital expenses are capped at $5,000. If you have more than that, you can roll it over into tax deductions for future years.
These are just a few of the tax deductions that will help lower your business tax bill for the year, whether you are a corporation or a sole proprietor. While some of these can only be utilized by those who work from home, most are available for all small business owners to enjoy.