June 14, 2024

Tax reliefs are the ones that one can avail themselves of to reduce their tax liabilities and have extra income, which they can either invest or spend on discretionaries.

After the federal tax law changes, the amendments have changed the laws on tax deductions and credits. Hence, for a small business owner, it’s necessary to know on which grounds they can avail themselves of tax relaxations.

In this blog, we will look into some of the most innovative and legal ways through which a small business can save on taxes, have an upper hand in the process, and reduce their liabilities.

Strategies to Apply To Reduce Taxes

For small business owners, sometimes it gets tough to find ways to reduce taxes, and for that, they face the heat that doesn’t allow them to compete with the big businesses in that region. There are tax relief lawyers who can help them choose the right deal and save on their annual taxes. 

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1.      Employing a Family Member in Business

The first task for a small business owner is to find ways to employ a family member in the business, which gives several tax benefit options to an individual. For example, if a person runs a sole proprietorship business, then they can hire their spouse and give them an income, which will then become tax deductible.

A person can, therefore, transfer a significant amount to that employee, and that reduces the overall profitability of the business, and that means one needs to pay less on taxes for that year.

2.      Start a Retirement Plan for Yourself

Now, several retirement options are not available for salaried individuals. Still, for a person who runs a small business for them, it’s a great way to park some money in a separate asset class, and that is also tax deductible.

The one-participant 401(k) plan and Simplified Employee Pension Plan (SEP) are some of the schemes that allow a person to cover their retirement plan by keeping aside several amounts, and through that, they can save their current profitability from getting entirely taxed.

3.      Create a Health Savings Account (HSA)

A Health Savings Account is one of the major aspects that is required for every person as medical cost are soaring, and a person needs to pay that entirely when they fall ill or some other family member.

Though HSA is a good cover for a person’s health, it’s a hedge that allows an individual to save on taxes, put a considerable amount in that account, and reduce total profitability by getting fewer tax files.

4.      Changing Business Structure

Another probable option for an individual is to change the business structure as it allows a person to have multiple tax benefits as they change the business incorporation based on the profitability and growth of the business.

An individual can consult with an attorney for IRS problems and other tax-related issues that might occur when a person changes the business incorporation. Through that preparation, one can ensure the required outcome for their small business and meet the goal of saving taxes.

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