4 Business Tax Tips to Legally Minimize Your Liabilities
Paying taxes is unavoidable. Most savvy business men and women, however, find ways to lower their tax liabilities by wisely planning their financial expenses and using methods to either defer or legally reduce their liability.
There are a few ethical strategies you can use to minimize the liabilities of your taxes. Here are a few examples of how you can reduce your income, lower your tax bracket, and minimize your tax bill.
Increasing retirement contributions is one of the easiest and most cost-effective ways to save money. Tax-deferred retirement accounts such as 401(K)s or 403(B)s allow you to contribute pretax dollars of up to $18,500 in 2018, and after the age of 50, you can contribute an additional $6,000. These provide a dollar for dollar reduction to total taxable income and greatly decrease your liabilities.
Make contributions to traditional IRAs instead if you do not have an employer-sponsored IRAs allow up to a $5,500 contribution with an additional $1,000 allowed for those over 50 years of age. Keep in mind that this deduction is not eligible to single or head of household individuals and phases out with a modified adjusted income of $61,000 and eliminated at a maximum adjusted gross income of $71,000. For those filing jointly, the deduction phases out at $98,000 and is eliminated at $118,000.
Make monetary or household item contributions to non-profit organizations or the donation of your choice. This allows you to donate money to causes and people you care about and save money on your taxes. Items worth more than $250 require a receipt to be a valid deduction, and there is a limit to donations that are above 20 percent of your adjusted gross income. You can also shift income to a donation by gifting them up to $15,000 per year without paying taxes, and you can give to as many donations as you would like.
Contribute to a health savings account and a flexible spending account. HSA and FSA contributions are deductible, and the money used is tax and penalty free regardless of your age. This can allow you to receive medical care without having to pay additional taxes. With HSAs, the money not used can be invested and treated as a retirement account similar to a 401K.
Learn More Tax Tips from Dynamic Accounting Services
To learn more about how you can legitimately lower your tax bill, contact our firm today. We can help you make the most of every dollar and avoid paying unnecessary taxes.