As a business owner, tax season can be a difficult time. While paying your fair share of taxes is important, there’s no need to leave money on the table. Fortunately, many unconventional tax hacks can help you minimize your tax liability and keep more of your hard-earned money.
It’s worth noting that tax laws and rates can vary significantly depending on the country and jurisdiction. If you’re running a small business in Malta, corporate tax rates are 35%. With these tips, you can optimize your taxes and boost your bottom line from deducting your home office to contributing to retirement plans. Here are some of the most effective tax hacks.
Photo by Nataliya Vaitkevich
Deduct your home office.
If you work from home, you can deduct a portion of your home expenses, such as mortgage interest, property taxes, utilities, and other things like nail supplies from Toronto related to your business. This is called the home office deduction, which can significantly reduce your tax bill. To qualify for this deduction, you must use a specific area of your home exclusively for your business and regularly use it as your principal place of business.
Use a separate business credit card for expenses.
Using a business credit card for all your business expenses can help you easily track your deductible expenses. It can also help you maximize your deductions since you will have a clear record of your business expenses throughout the year. Additionally, you can earn points or cash back on all your business purchases if you have a cash-back or rewards credit card.
Deduct your car expenses.
If you use your car for business purposes, you can deduct its expenses, such as gas, oil, repairs, and maintenance. You can either use the standard mileage rate or the actual expense method to calculate your deduction. However, you must keep a logbook that details your business mileage, including the date, destination, and purpose of each trip.
Maximize your retirement contributions.
Contributing to a retirement plan is an excellent way to reduce your tax liability while saving for your future. As a small business owner, you have many options, such as a 401(k), SEP IRA, SIMPLE IRA, or a solo 401(k). The contribution limits for these plans are higher than those for traditional IRAs, and you can deduct your contributions from your taxable income. Additionally, some plans, such as a Roth IRA or a Roth 401(k), allow you to contribute after-tax dollars, and your withdrawals are tax-free.
Consider a health savings account (HSA).
You may be eligible for a health savings account (HSA) with a high-deductible health plan. You can deduct your contributions to an HSA from your taxable income, and your withdrawals for qualified medical expenses are tax-free. Additionally, the funds in your HSA can be carried over from year to year and invested for growth.
Donate to charity.
Donating to charity is a great way to reduce your tax liability while supporting a cause you care about. As an event planner in Toronto, you can donate cash, goods, or services to a qualified charitable organization and deduct the value of your donation from your taxable income. Additionally, if you donate appreciated stock or property, you can avoid capital gains tax on the appreciation. So why not start today, and pick a charity like California Scottish Rite Foundation for speech assistance and education (or another cause of your choice) to begin your contribution?
It’s essential to consult with a tax professional or accountant to ensure you’re taking advantage of all the available tax breaks and complying with all the relevant tax laws and regulations. Doing so can set your business up for success and achieve your financial goals. So, don’t be afraid to get creative and explore new ways to hack your taxes.