Tax Loopholes 3 Ways To Make Tax Laws Work For You

Many people associate the​ words “tax loopholes” with questionable accounting practices. But according to​ tax strategist Diane Kennedy,​ of​,​ “A loophole is​ nothing more than a​ government incentive—tax laws are written to​ favor people wanting to​ start businesses because businesses stimulate the​ economy.” Tax loopholes are just legitimate deductions the​ government allows in​ order to​ encourage certain behaviors. Exploiting loopholes isn’t about skirting the​ law,​ but rather making it​ work for you.

3 Steps to​ Reduce Taxes

1. One of​ the​ best ways to​ reclaim your tax dollars is​ by starting your own business. Owning a​ business allows you​ to​ take advantage of​ the​ way those laws are written. With the​ increase of​ e-commerce,​ it’s easier than ever to​ start an​ online business. Whether you​ offer a​ product or​ service,​ an​ e-business is​ an​ excellent vehicle for lowering your tax liability.

2. as​ a​ business owner,​ it’s crucial you​ consider the​ business structure in​ which you​ operate. Don’t just start selling online without considering the​ tax implications or​ bothering to​ incorporate. Says Kennedy,​ “Your business structure can save you​ a​ lot of​ money—not acting on​ that can cost [you] tens of​ thousands of​ dollars.”

3. Many business owners miss out because they fail to​ take all their lawful deductions. Particularly when starting a​ business,​ you’re going to​ encounter many expenses that you​ can legally deduct—but you​ have to​ report them or​ they don’t do you​ any good. It’s important to​ keep good records of​ all your business-related costs because anything ordinary and necessary to​ the​ production of​ income is​ a​ valid deduction. Don’t be afraid to​ take advantage of​ the​ business tax breaks the​ law allows:

• Home-offices. Changes in​ tax laws have made this a​ fairly simple deduction. you​ need a​ separate room used exclusively for business,​ and you​ must regularly conduct business in​ that room. if​ you​ meet those two criteria,​ you​ qualify for a​ home-office deduction.

• Business-related storage space. Unlike a​ home-office,​ this space can be multifunctional. if​ you​ use one-third of​ your spare room to​ store inventory or​ promotional products,​ and the​ remaining space as​ a​ wreck room,​ then one-third of​ your spare room is​ tax deductible.

• Wages. Rather than giving your kids an​ allowance,​ pay them to​ help out with your business.

• Travel. All your business travel is​ deductible. For validation reasons,​ you​ need to​ keep track of​ the​ mileage and purposes of​ your trips.

• Donations. Anything you​ donate to​ your business serves as​ a​ deduction. Even if​ your business can’t afford to​ repay you​ right away and you​ have to​ take a​ loss there,​ that net operating loss can roll forward and offset future income.

Money you​ earn is​ subject to​ taxes—the more you​ earn,​ the​ more you​ pay. However,​ when you​ save money by reducing your tax bill,​ your savings are yours to​ keep. Tax laws are written to​ foster your business’ growth,​ so put them to​ good use. Take a​ good look at​ your accounting and expenses,​ and avail yourself of​ the​ tax loopholes and breaks your business entitles you​ to.
Tax Loopholes 3 Ways To Make Tax Laws Work For You Tax Loopholes 3 Ways To Make Tax Laws Work For You Reviewed by Henda Yesti on July 01, 2018 Rating: 5

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