Navigating the complexities of business taxes can be daunting, but ProActive Tax Planning can significantly reduce your tax burden. Every year we have people asking how they can lower their tax bill. The NUMBER ONE THING you can do is plan ahead. This is how you can actually reduce your tax bill because there are only so many strategies we can use for your tax return that is due in April when you want to start the process in February. Whittaker offers a comprehensive approach to help businesses optimize their tax strategies. Alongside planning ahead here are some strategies that will help you pay less on your business taxes.

Choose the Right Business Structure

Selecting the appropriate business structure is crucial as each type has different tax implications. It is also important to understand that you might need multiple corporations if your business also owns real estate.

  • Sole Proprietorship: Simplest form but offers no liability protection.
  • Partnership: Allows for shared responsibility and potential tax benefits.
  • LLC (Limited Liability Company): Combines liability protection with pass-through taxation.
  • S-Corp: Profits and losses can be passed directly to owners’ personal income without being subject to corporate tax rates.
  • C-Corp: May be beneficial for larger businesses but involves double taxation (corporate and personal).

Advantage of Tax Deductions

Tax deductions can significantly lower your taxable income. While you may know of some tax deductions that you already use there are far more that you have probably never even heard of, one of our favorites being a cost segregation study which actually falls under one of these examples:

  • Operating Expenses: Deduct everyday business expenses like rent, utilities, and office supplies.
  • Home Office Deduction: If you work from home, deduct expenses related to the portion of your home used exclusively for business.
  • Depreciation: Deduct the cost of expensive equipment and assets over time through depreciation.

Claim Tax Credits

Tax credits directly reduce the amount of taxes you owe and can be more valuable than deductions. One of our favorite tax credits is by far the R&D Credit for a variety of reasons that you can learn here. Overall these are probably our two favorites:

  • R&D Credit: If your business invests in research and development, you may be eligible for the R&D tax credit.
  • Energy Efficiency Credits: Installing energy-efficient systems and renewable energy solutions can offer tax credits.

Defer Income

Timing can play a significant role in your tax planning.

  • Delay Income: If possible, defer income to the next tax year to reduce your current tax bill.
  • Accelerate Expenses: Conversely, accelerate expenses into the current year to lower your taxable income.

Employ Family Members

Hiring family members can be a strategic way to reduce overall tax liability.

  • Hiring Family: Employing family members can make wages paid to them tax-deductible. Additionally, children might fall into a lower tax bracket.

Benefit from Retirement Plans

Retirement plans offer significant advantages when it comes to taxes. Getting in touch with a CPA and maybe even a CFP (certified financial planner) to make sure you are truly getting those most benefits. Here are some examples of plans:

  • 401(k) Plans: Contributions to employee retirement plans are tax-deductible.
  • SEP IRA: Simplified Employee Pension plans can be advantageous for small business owners.

Proactive Tax Planning with Whittaker & Company

ProActive Tax Planning is essential for maximizing your business’s financial health. Whittaker offers comprehensive tax planning services tailored to your unique needs. Our PDF guide that you can download here has a few of our favorite ProActive strategies that we see the best return with and use most often. Implementing these strategies requires careful planning and often professional advice to ensure compliance with tax laws and regulations. By taking advantage of these tips and consulting resources from Whittaker, you can significantly reduce your tax burden and improve your business’s financial health.