People take a plunge into entrepreneurship to make money. However, the company’s initial phase can feel tough with little to save. But you can make a difference knowing how much you save and where. You have to pay taxes even on the income generated from your small business. As a small business owner, you enjoy tax deductions on business expenses. Knowledge about them lets you keep a decent portion of your hard-earned money. You could deduct your computer and mobile phone bills from your taxable income. And the best thing is that almost all businesses and industries can benefit from claiming them. Here is a list of the few options to optimize your tax savings well.
Retirement savings
People often push retirement planning back to give their new venture more time. But this is also a critical aspect which you must pay attention to. The longer you avoid this, the more you increase your chances of financial suffering in the golden years of your life. Fortunately, there are some excellent retirement plans Traditional IRA, Roth IRA, and Solo 401(k). Self-employed people can choose the last option as it helps them save their pre-tax dollars more, allowing the contribution of USD $22,500 and, for 50+ people, USD $30,000. You can safely put money into this account as an employer and employee if you stick to the overall annual contribution threshold. Check solo401k.com for a quick understanding.
Business travel
Only necessary and ordinary expenses can enjoy tax benefits. Whether you go on a business or business-cum-leisure trip, your business expenses can be tax deductible. The IRS has some rules, though. For instance, the distance should be at least 100 miles from home, and it has to be an overnight plan. You will need to show receipts during tax filing. So, keep your train tickets, airfare, taxi, and accommodation bills safe. For frequent flyers or travelers, saving a few extra dollars is a considerable relief.
Office rent
As a small business owner, you can save rent money from your taxable income. However, claim deductions under the home office category if you have a home office. Even garage parking rent is also deductible.
Relocation cost
Data suggest that 27 million Americans changed their state or country in 2022. You can recover some of the cost if you relocate your small business. The structure of the business plays a critical role in this. An LLC or corporation can cover the entire relocation expense from company taxes. It includes surveys, packing, brokerage, transport, and more. Partnership and sole proprietorship businesses must satisfy two conditions – the distance from the old place should be at least 50 miles, and the company should operate for at least 39 weeks over a year in the new site. You don’t get this option with a home office.
Marketing and promotions
The campaign could be any size. You can claim up to USD $5,000 for a year. Claims can be valid for various expenses like Google and Facebook ads, business card and flyers printing, website hosting, SEO consultancy charges, etc.
These are only a few things. The list is long. If you open your Solo 401(k) account and do some due diligence in other areas, you can save an adequate amount after paying your tax.