home business - Tax Loopholes - 3 Ways to Make Tax Laws Work FOR You
by Chris Malta
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 tax 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 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 multi-functional. If you use one-third of your wreck room to store inventory or promotional products, then one-third of that room's square footage is tax deductible.
Rather than giving your kids an allowance, pay them to help out with your business.
• Travel. All your business travels, including driving around town for business errands, are deductible. For validation reasons, you need to keep track of the mileage and purposes of each trip.
• 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 close look at your accounting and expenses, and avail yourself of the tax loopholes and breaks to which your business entitles you.