Who doesn’t love a good coupon? Whether it’s saving 50% on that coffee or finding a BOGO deal on supplies, coupons make us feel like savvy shoppers. But did you know Uncle Sam has his own version of coupons, hidden right in the IRS tax code? If it could only be that easy to get all the tax deductions and credits for the ultimate discounts for business owners. The reality is that there are varying rules that have to be followed to optimize what the IRS allows. Which means that it is more efficient to be proactive than reactive when it comes to optimizing the deductions and credits that would be best suited for your situation. Just like finding the perfect coupon with the IRS, AKA tax deductions and credits will help you save your hard earned money.
Finding the Perfect Coupon-- AKA IRS Tax Deductions & Credits
Just like scanning for the best deals, tax deductions and credits are ways to help cut down the cost of running your business. Tax deductions help lower your taxable income, while tax credits directly knock off what you owe. If you have ever gone on a coupon binge and save just a little of the selling price, you get really excited. Now imagine that feeling, but for your tax bill.
You don't want to start looking at the deduction and credit options just before you are ready to file your taxes. You want to be have a general idea of which deductions and credits would be relevant to your business. Some of the strategies are reusable, but some deductions and credits could have some limitations and not even be applicable.
It's All About Timing to Stack Your Savings
Proactive tax planning is like scouting for sales before you even get to the checkout. Just as you wouldn't go to the store without knowing if your coupons work, tax planning lets you "stack" deductions and credits legally. This strategy can potentially help save hundreds or thousands come tax season. As an example, there are tax loopholes that are easy to use, but often many don't use the simplest of strategies. As some examples, home office deduction or the Augusta Rule. These two under utilized strategies can help lower your taxes.
These are warm-up strategies for serious tax planners. I have seen where some people feel a little awkward using available deductions or credits, as if they are doing something wrong, and potentially get in trouble. Once the simple tax strategies are relied on, some advance into more complex to sophisticated ranging from research and development to cost segregation. You should work with someone skilled at tax planning that can help in determining how to position and when to properly execute on a strategy.
Don't' Let the Deals Expire
Just like coupons that have a limited time to use, some tax deductions and credits also have a limited time offer or a reduction in allowable amount that can be deducted or credited. If you or your tax professional or preparer are not proactive, you could miss out. Picture the horror of finding out that you could've deducted that home-office renovation but missed the deadline. Cue the tears!
I have seen where a business owner saved $30,000 to $50,000 in taxes, which could be redeployed as owners equity in the business as a salary or other business investment. It makes perfected sense to max your business tax bill more effectively to put that capital to work building up you community, your business and your net worth.
Conclusion and Call to Action
Just as a coupon savvy shopper maximizes savings by planning ahead, you can maximize your tax savings with a proactive tax strategy. So why not schedule a tax assessment? Think of it as a clipping coupons for your bottom line, except in this case you could actually save thousands!
Need a Tax Review to maximize your tax bill? We can help with a complimentary tax review.
What is involved?
1- Prior years tax returns for personal and the business
2- Current pay information and profit & loss details if own a business
3- Current investment income reports
4- Real estate expense and income reporting
5- Understanding of current and long term goals
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