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from my experience, there are no magic tricks to reducing our company/owner taxes. if i am paying lower taxes, im probably earning less income.
i think that is the case for most people. some business can depreciate real estate/equipment or shift around income from overeas but that isnt most businesses.
My family never owned or ran businesses, so I'd like to know what are the many ways business owners use their businness to their advantage when it comes to minimizing income taxes personally and in their business?
You can only deduct legitimate expenses. That's money you have spent, so it might reduce your taxes but it increases your expenses. Roughly. you'll save 30 cents of taxes for every dollar you spend, so unless you really want to run a business, there is no point of opening one just to reduce your taxes.
Depreciation helps reduce the tax bill, but you can't depreciate a thing you didn't buy. In real estate, after you get your nice depreciation, you have to recapture it and pay taxes on it after you sell.
You might (might) be able to depreciate a car, but only for business use. You can't use the business car for personal use and depreciate it.
Some of the suggestions here are not legitimate business expenses to legally reduce your taxes. They are simply tax fraud and if you want to take the chance and lie on your taxes, just lie. You don't have to open a business in order to lie on your tax return.
from my experience, there are no magic tricks to reducing our company/owner taxes. if i am paying lower taxes, im probably earning less income.
i think that is the case for most people. some business can depreciate real estate/equipment or shift around income from overeas but that isnt most businesses.
You could always leave New Jersey. A client of mine moved their entire operations out of there. Slashed their tax bill. Two years later, he still talks about it how much he saves.
Back to the OP. As someone who has started, grown, and sold several enterprises, your first move should be to hire a good accountant who understands small business and communicate with him/her throughout the year. Towards the end of the year, begin your tax planning. Don't just hand him a shoe box of receipts in February and ask him to work miracles.
As one example, we do our business accounting on an accrual basis, but pay our taxes on a cash basis. As we close in on the end of the year, we convert our income statements, knowing to the penny how we're doing on a cash basis. If we're making a larger profit than expected, we accelerate spending while deferring revenue. One year, my business had billings of around $5 million. However, we had a busy year-end and kept procrastinating when it came to that set of calculations, finally getting around to it the last two days of the business year. We learned that we had about $250,000 in additional profits on a cash basis. Trust me. We were writing a lot of checks on the 31st of December that year.
Of course, with corporate taxes down to a sane and reasonable 20%, I no longer have to go through nearly that amount of shenanigans.
You could always leave New Jersey. A client of mine moved their entire operations out of there. Slashed their tax bill. Two years later, he still talks about it how much he saves.
...that being all there is to do, sitting around in front of the general store in Bofock, NC.
Have you considered increasing your company health insurance plan? Provide every employee with really good health insurance. That should reduce your taxable profit a good amount.
Are there any 'professional development' seminars anywhere that would sort of apply to the jobs of your employees? Once a year send each employee to a seminar somewhere [Vegas, Miami, Tahoe, Waikiki, etc]. If it is a 3-day seminar, spring for 5-days [the day before and a day after] and include a plus-one with each package trip.
My family never owned or ran businesses, so I'd like to know what are the many ways business owners use their businness to their advantage when it comes to minimizing income taxes personally and in their business?
I knew a guy in the car business, he bought a new boat annually. The boat was owned by the dealership and sold each year for a loss but he got to use it, dealership fueled/insured it. Nice perk!
I knew a guy in the car business, he bought a new boat annually. The boat was owned by the dealership and sold each year for a loss but he got to use it, dealership fueled/insured it. Nice perk!
probably makes sense to lease a luxury vehicle if i had a business
1) buy everything in China for 5 cents and sell garbage to the American public or
2) hire Mexicans or under pay people to do the work to make up for taxes or lost profits
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