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Are you thinking of setting up your own home-based business but are worried about taxes? If so, this is probably the best time for you to go and pursue that plan as more and more small business tax benefits are being added to the US tax code. The US Congress has realized the importance of small businesses and in return, is enacting more laws to help small businesses flourish by adding small business tax advantages in the tax code.
Small Business Tax Benefits and Your Personal Advantages
Small business tax benefit laws not only ease the operating costs of your business but also help you reduce your personal expenses as well. How? Here are three small business tax advantages you should know about.
Small business tax benefit #1: Have your small business taxed only once. Small businesses, or in more formal terms, 'passthrough entities', are taxed only once as opposed to bigger corporations, which are taxed twice. Big corporations are taxed both at the corporate level and individual level whereas small businesses are only taxed at the individual (or owner) level. This cuts your business expenses and helps you (the small business owner) allocate more money on other productive business initiatives (such as capacity expansion) rather than on tax payment.
Small business tax benefit #2: Write off all legitimate expenses; anything that is used to operate your business is considered an expense. This includes the utilities you use in your home business, business lunches, car expenses, and even education and educational material, such as business books magazines and self study courses. Anything that helps you promote and operate your businesses is a legitimate expense.
Small business tax benefit #3: Double your benefits by employing your family members. Aside from yourself, your small, home-based business may be participated in by your family members like your wife, children and even your parents. One small business advantage of having them as your 'employees' is that you have flexibility in terms of time, communication and extent of responsibilities. The small business tax benefit in this arrangement, on the other hand, is that each family member may belong to a different tax bracket, giving you greater control over your income and payroll.
It is often said that 'if people only knew what tax cuts are applicable to them, they will not dread paying taxes so much'. Small businesses can really gain much needed finances if only business owners take the time to know or seek advice regarding small business tax benefits.
Action Steps to Small Business Tax Benefits
1. Identify the exact industry your business belongs to.
2. Check that all your business and financial documents are in order.
3. Check online sources to read up on small business tax benefits.
4. Contact a business tax advisor in your area to discuss tax benefits that apply to your business.
Important Points to Small Business Tax Benefits
- Small business taxes cannot be avoided. However, paying them may not be as 'painful' once you know the tax cuts applicable to your business.
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