Home > Accounting and Tax Guide
What are Tax Planning Strategies? Using the Best Resources to Succeed!
Tax planning is defined as the analysis of a financial situation or plan from the perspective of tax. You would participate in tax planning to make sure that your taxes are done efficiently. This also helps you reduce your tax liability and helps maximize your ability to contribute to your retirement plants. Tax planning is critical for success. Let’s take a look at some of the best tax planning strategies to use!
1. Minimize/Eliminate Medicare Tax on Personal Investment Income
This can be done by reducing the amount of rent that is charged to a personally-owned business. This includes if they personally own any equipment as well. You can also do this by increasing retirement plans and gifting assets to charity.
2. Know the Options
Retirement contributions are tax-deductible. This means that the amount you put into retirement plans can be deducted on your taxes. Those who are over 40 who have younger staff can make what is known as a safe harbor. This is a profit-sharing plan and a pension plan. This helps save thousands on both state and federal taxes.
3. Classify Your On-The-Road Expenses Properly
Your meal and entertainment are 50 percent deductible. However, they should be separate from your travel, continuing education, and lodging expenses. The travel, lodging, and education expenses are fully deductible whereas meals and entertainment are only 50 percent. You should also make sure that any meals that are for functions, outings, or staff meetings are being classified under office expenses.
4. Hire a Spouse
When you employ your spouse, you can pay them a general annual salary of 3,000. This means that your spouse can qualify for Child Care Credit, Social Security Benefits, and fringe benefits. Plus, at the same time, you are minimizing your payroll taxes. However, if you have two children with your spouse that are under the age of 13, make sure that the expenses are matched with the salary provided to your spouse. This can only be 6,000 dollars max per year.
5. Be Generous to Your Children
You should transfer your appreciated property which includes real estate and stocks. This should be something that you plan to sell to the children who are either 19 or older or who are full-time students. Full-time students fall into the age category of 19-23. Once they gain this, they can tax rates at 0 percent. Plus, this also helps you avoid the Medicare tax.
6. Be Generous to Those in Need
Charitable contributions can be deducted from taxes. Contributing does not have to mean that you are giving money to the association. You can also gift clothing and other items. You want to gift items that are property and can increase in value. This includes artwork, bonds, and stocks. These are all tax-deductible.
7. Put Money in a 401(k)
If you are employed, your employer may have a 401(k) savings or investment plan. This is money that you can set aside for your retirement. You are not taxed on the money that is put into this account and that is taken off your paycheck. You can add up to 19,000 per year if you are under the age of 50. If you are over the age of 50, you can put up to 25,000 dollars in your retirement plan.
Whether you are an individual looking for a break or a business looking for the best possible way to save money, there are tax advisors out there to help you. Denver Tax Advisor will help your small business or you personally to achieve the best tax planning strategies.