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Getting a handle on which taxes you may face is the first step toward managing them effectively.
Primarily, youll deal with two types of taxes: income tax and self-employment tax.
Before implementing any tax strategies, it can be a good idea to consult with a qualified tax professional.
Reducing Adjusted Gross Income
Your taxes are paid on your adjusted gross income.
Look into other deductions for which you might be eligible.
However, many of them dont take full advantage of that come tax time.
To maximize deductions for the business use of a personal vehicle, track all business-related mileage and expenses.
The IRS allows you to choose between thestandard mileage rate deductionor actual expenses like gas, repairs and depreciation.
If you have an expensive vehicle, you might benefit more from deducting real expenses.
If your vehicles are cheaper and you drive long distances, you might benefit more from the per-mile deduction.
The space must be regularly and exclusively used for business to qualify.
The funds grow tax deferred until retirement, when withdrawals are taxed as ordinary income.
Like the IRA, contributions to a traditional 401(k) are made pre-tax, reducing taxable income.
Cash balance plans can be a good choice for higher-income earners.
Under certain conditions, these can be excluded from taxable income.
This means your employees dont pay taxes on the reimbursement, and you dont payextra payroll taxes.
Any excess reimbursement must be returned to the employer.
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