My Top 3 Year-End Tax Savings Tips to Help You Save Money

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This time of year is when a lot of businesses start thinking about getting ready for taxes. Your bank account balances are generally getting a little stronger throughout the holiday season, and it can be tempting to go on a little shopping spree for your business to “get the tax deduction.”

And while there is SOME truth to that, I want to share my top 3 tax saving tips to help you make smart decisions for your business AND your bank account.

Tax Savings Tip #1: Make the Investment

If you’ve been having your eye on something specific for your business (new equipment, training/mentorship program, etc…), then yes, you can absolutely use this opportunity to make it happen! I always just caution business owners against spending money JUST for the tax deduction, because for every $100 you spend, you’ll really only save about $30 in taxes. So, if you’re spending that money “just because”, you’re still really losing that $70.

Tax Savings Tip #2: Evaluate Software Costs

If you don’t have anything specific to buy, take a look at all your monthly software costs! Many software & apps offer a discounted annual pricing. By switching some subscription costs from monthly to annual in December, you’ll get a little extra tax deduction this year as you essentially pre-pay for the next year’s cost AND it will help you free up a little extra cash flow during the slower months by not having to pay for it monthly.

Tax Savings Tip #3: Consider the S Corp Election

Evaluate if it’s time to make an S Corp election in your business. If you’re not familiar with what that is, it means that you will essentially become an employee of your business, and all your wages & payroll taxes become a deductible business expense. Plus, since you’re becoming an employee of your business, you will no longer need to pay the 15% self-employment taxes. (You can read more about the benefits of an S Corp election here)

Unfortunately, this typically won’t help you save taxes on the current year, but if your business has been growing where your net PROFIT (bottom line) is over $80,000 this year, it’s DEFINITELY time to start thinking about making this election for next year! The deadline to file is March 15th for the current year, so this is the perfect time to start thinking about it, and working with your tax preparer to evaluate if it’s the right move for you!

BONUS TIP: Take a Physical Inventory Count

And, because I’m feeling a little generous today…here’s a 4th tip for you. PLEASE make sure that you are taking a physical inventory at the end of the year! So many business owners do not do this because it’s a grueling process (and I get it). But, this is the only way that you can truly capture the expense associated with damaged/stolen/spoiled inventory, so you can get that additional deduction as well! If you need a little more encouragement to get this done, you can read about the Importance of Completing a Physical Year End Inventory here

Here’s to finding your own version of freedom,