5 Tips to Lower Taxes in 2024

It’s said that the only two certainties in life are death and taxes. Still, humans often try to claim their youth and business owners repeatedly ask for tips in understanding their taxes. According to the U.S. Internal Revenue Service, Americans owed more than $120 billion in back taxes, penalties, and interest in 2022. This comes at a time when business owners rate their optimism for current market conditions historically low.

“Among the many hats business owners wear, ‘tax expert’ is not one that many feel comfortable with. There are several options for lowering upcoming tax liabilities that small businesses might not be aware of,” said Raj Tulshan, founding partner of Loan Mantra.

One of the most common questions owners ask is whether they are eligible to receive tax incentives or tax benefits for their business. Still, even if a small business is eligible for tax benefits, they may not know how to take advantage of those kinds of incentives. Here are five ways you can positively impact your 2024 taxes as a small business:

Pay for healthcare:

A business owner who pays for health insurance may be able to claim it as a deduction. If you meet the requirements to claim this deduction, all or part of your health insurance premiums may be tax deductible. It’s important to note that the adjustment is typically limited by the total profits from your business where the plan is established. But you may claim a healthcare deduction if your care costs meet or exceed 7 percent of total income each year.

Save for retirement:

Business owners without employees can establish single-participant 401(k) plan, often called a “Solo 401(k).” This allows saving up to 100% of income as an employee contribution, up to the annual limit. In addition to the employee contribution, business owners might be eligible for an employer contribution based on net income. (For example, $61,000 could be contributed to your solo 401(k) in 2022, and $58,000 in 2021). These limits increase by $6,500 for individuals who are 50 years or older.

Compute the commute:

Costs associated with your automobile could be deductible if you drive for your business. There are two ways this deduction may be taken. If a vehicle is used entirely for business, the IRS allows expenses related to owning, operating and maintaining a business vehicle to be deductible. However, standard mileage rates can’t be deducted. The second option is to claim a standard mileage rate for business-related trips and travel. Remember, there are additional tax incentives for business owners who are driving energy efficient automobiles, too.

Photographer: Fortune Vieyra | Source: Unsplash

Review financials:

Costs related to financial services like bank fees, interest on commercial loans and credit cards could be deductions. A financial expert can help determine loan requirements, finance charges or whether the business is able to deduct interest on any loans. Unless the interest paid on a loan is subject to special limitations, it typically counts as a deductible business expense on taxes.

Make a claim:

When reporting business income on a personal tax return, certain businesses may be eligible for a qualified business income tax break. Entities eligible to claim this deduction include: Sole Proprietorships, Partnerships, Limited Liability Companies (LLC) and S Corporations. The qualified business income deduction allows eligible small business owners to deduct up to 20 percent of their qualified business income on their taxes. This applies to businesses making $164,900 for single filers or $329,800 for joint filers in 2021 or $170,050 and $340,100 in 2022.

If you have questions about your business taxes, reach out to the advisors at Loan Mantra.