Some small business tax savings strategies, like timing income and expenses, must be accomplished before the end of the tax year. But others, such as funding a retirement plan, can be done at any time before you file your tax return. If you’re looking for ways to save money on your small business taxes, keep reading. This deduction is in addition to claiming your ordinary business expense deductions. You should qualify if your taxable income is below a certain amount—it was $164,900 for single filers and $329,800 if married filing jointly for the 2021 tax year. Special rules apply if you earn more than these amounts, so you might still qualify depending on the nature of your business. The QBI deduction has some other restrictions and limitations, so check with your tax preparer about your eligibility. For example, you can take tax credits for hiring employees, implementing environmentally friendly initiatives, providing access to disabled employees and the public, and providing health coverage for employees. Most are part of the General Business Credit, which is quite extensive so it’s quite possible that you qualify under some of its terms. Check with your accountant. Section 179 deductions allow you to immediately deduct the costs of certain assets when you put the assets in service. The maximum deduction increases annually, and is $1.08 million for tax year 2022. Equipment, machinery, buildings, vehicles, and more can qualify. Bonus depreciation is an extra benefit for buying assets. The TCJA also increased this tax break from 50% to 100% of the cost for assets placed in service from Sept. 27, 2017, through January 1, 2023. Talk to your tax preparer if you’ve purchased any major assets to find out if you qualify. Review your current expenses before the end of each year and prepay some of those amounts if you want to reduce your income for the current year. You can also increase your expenses and decrease income by making expenditures, such as stocking up on supplies at the end of the year so that you’re covered for the first quarter of the next. Bad debts can also include loans made to clients, vendors, or employees who don’t pay you back. An enrolled agent might be your best bet. These professionals are designated by the IRS because they’ve passed a strenuous, three-part test, or because they actually worked for the IRS at some point.
