If you’re looking for ways in which you can immediately save your small business money, stop reading now because this article isn’t for you. However, if you are looking for ways in which you can save your small business money in the long term then you have most definitely come to the right place. What’s more, the information below won’t just save you money, it will save you a lot of stress too.
The information we are alluding to are tax loopholes, and the sooner you start capitalizing on them the chunkier your savings will be in the coming years. We’re all about the long game.
Income Splitting With Family
Income splitting is a technique often used to shift the income from a taxpayer paying high rates of tax to a family member that is paying a lower rate of tax. Of course, there are provisions designed to stop stop people saving through this technique, however, there are still a few permitted arrangements that allow you to redistribute income. It could be that you pay your spouse or children a reasonable salary, or invest in child tax benefit payments in their name, or look into pension income splitting. It could even be that you sell or transfer some of the businesses assets to a family member, or contribute to a Registered Education Savings Plan. What’s more, these are but just a few of the permitted options available to you, so it well worth delving into this loophole a bit further and seeing what other avenues are available.
If you haven’t heard of this term before, and chances are you haven’t, then go and speak to your accountant and ask him about a 1031 exchange property. In short, this rule allows an investor to sell a property and reinvest the proceeds into a new property while deferring all capital gains taxes. What’s more, there is no limit to how many times you do this, meaning you can facilitate a significant growth across your property portfolio and see an increase return on your investment. A lot of time with law, it is all about looking at what the terms being used are and knowing exactly what they mean in the eyes of the law. For example, the law states a property can only be exchanged for a property of like-kind, but the term like-kind is open to translation, so don’t overlook other properties or opportunities without speaking to an expert first.
An ideal tax tip for any small business that is turning over a nice profit and making you a healthy salary, is to look into Subchapter S. This is all too often overlooked or ignored by accountants, for whatever reason, but it essentially allows a corporation or LLC the chance to split their profits in two different ways, one of which allows you to avoid paying the self-employment taxes, Medicare taxes and Social Security taxes associated with owning a business. As you can imagine, by using this loophole you will be saving yourself a lot of money.