February 6, 2023

Methods to Decrease Your Income Tax Bill

IRA Investment Strategy

Here’s how you can get the tax break for that year even if you don’t have enough money to make an IRA contribution by the April 15 deadline. All that is required to get started is an active IRA account.

Get started with an IRA distribution of $6,000. Put the $6000 back into your IRA as soon as you can. In this case, if you do this before April 15th, it will be considered a tax-deductible donation for the current year. The upside is that the $6,000 withdrawal must be “made up” within 60 days (and avoid penalties and taxes). In order to avoid paying taxes and penalties, the $6,000 “rollback” can be deposited into the same IRA account within 60 days of receiving the check so that you don’t have to pay taxes. Discuss your case with an experienced business tax prep in Lake Mary, FL expert.

Identify the “Best” Retirement Strategy

As a self-employed small business owner, you have a few retirement plan options to choose from, but it can be difficult to determine which one is best for your situation. What constitutes the “optimal” choice for you may be contingent on factors like whether or not you have employees and how much money you hope to save annually.

Plans can be broken down into four categories:

  • Employer-Matching Contribution Program for Employee Savings (SEP) and Traditional and Roth Individual Retirement Accounts (IRAs) (SIMPLE)
  • Individual Retirement Accounts (IRAs) and Defined Benefit Plans (DB Plans) for the Self-Employed

Three, force your landlord to cover the cost of repairs.

You can negotiate with your landlord to cover the cost of leasehold renovations at your commercial space. In exchange, you propose increasing your rent payments to your landlord. You and your landlord can cut costs on taxes by using this method of funding leasehold renovations.

By legislation enacted in 2017, the term qualified leasehold improvements has been replaced by qualified improvement property (QIP). As a result of tax reform legislation passed in late 2017, leasehold improvements (as well as restaurant and retail) up to $1,000,000 can now be expensed using a Section 179 deduction (subject to certain rules); this means you can write off the cost immediately rather than spread it out over a 39-year period (similar to depreciating real estate).