Tax Planning for Small Businesses

tax planning

Small businesses require unique tax planning strategies, especially if they want to grow. Taxes can be a hardship for small business owners across all industries. However, a top-notch small business accounting services provider can help with every aspect of tax preparation services. We will explore some steps to consider before you consult a small business accountant.  

From how to structure your business to moves you can make now to reduce your taxable income when the 2024 tax season rolls around, here is a sample of strategies to help your business thrive. 

Consider a Tax Status Change- Especially If You Plan to Expand 

There are several options when it comes to how you structure your business. This is especially true if you have outgrown your current business structure in the past few months or past year.  

An LLC can be taxed like a C corporation via Form 8832 with the IRS, which allows a business to elect how to be classified for federal tax purposes.  This has become more common in recent years as the top corporate rate income has dropped from 35% to 21% as part of the Tax Cuts and Jobs Act of 2017. 

Small business owners may also decide to alter their status to a sole proprietorship, partnership, LLC, or corporation. A change in status can pass through business structures that do not have to pay corporate income tax. Instead, the net income from the small business passes through to the business owner’s individual tax return, which has a top tier tax bracket of 37%.  

Consider Various Opportunities for Deductions and Credits  

When it comes to how you operate your small business, regardless of your tax status, there are also several opportunities to reduce your annual taxes year after year.  

These include the following concepts.  

Tax Planning and the Home Office Deduction  

Working from home can have hefty benefits, as you can claim several office and property-wide deductions on your annual tax return. This includes utilities, mortgage interest, insurance, and property taxes. Additionally, you can claim any repairs you make to your home and your office specifically. 

There are two ways to claim a home office deduction. You can use the simplified method, which equates to a deduction of $5 per square foot for your home office. Or you can use actual expenses to calculate the percentage of your home office compared to your total home square footage. Just keep in mind that your home office must only be used for business and not for any other purposes in your home.  

The New Hiring Opportunities 

The Work Opportunity Tax Credit (WOTC) was introduced to allow employers to hire and assist individuals who have faced barriers and obstacles in the past.  

This includes the following groups: 

  • Individuals who receive public assistance, nutritional assistance, Social Security Disability payments, long-term Family Assistance, or unemployment compensation. 
  • Veterans of the U.S. military. 
  • Individuals with a past felony criminal record and who have paid their debt to society. 
  • Designated Community Residents (DCRs) who live in regions designated as Urban Empowerment Zones or Rural Renewal Communities. 

Optimize Your Saving Accounts 

There are ample tax saving opportunities for retirement accounts for small business owners and their employees. These savings include the expenses to launch a new retirement program, to the contributions you make for the foreseeable future. An expert in CPA services for small business owners can help navigate these situations and can help you find a retirement plan – and a tax planning strategy – those best benefits you.  

Consider the Vehicles You Use in Business 

If you use your car or truck on the job, there can be some hefty deductions in the future. Just make sure you keep careful track of your mileage. This applies whether you use the standard mileage rate deduction or actual expenses on your annual tax return. 

Partner with an Expert in Accounting Services for Small Business Owners 

Your best bet when it comes to reducing your taxes as a small business owner is to let an expert like Saddock Advisory take the lead.

At Saddock Advisory, we’ve helped various businesses, companies, and corporations. Our financial advisors know that regardless of size and industry, every client deserves a personal touch and the best service and attention-to-detail possible. 

 Let’s start a discussion about how we can put our team of tax planning experts to work for you. You can continue to work hard to operate, maintain, and grow your small business. We’ll work together to ensure that your hard-earned income stays in your pocket so you can grow and thrive in the many years ahead. 


Reach out to us today. 


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