7 Small Business Tax Strategies for 2022

As a small business owner, you can meet your goals more easily by taking advantage of tax savings suggestions that you can apply to your financial planning for 2023. The strategies include, for example, improving your tax payments strategy, better management of your charitable giving by using appreciated stock, protecting your wealth with an umbrella insurance policy, and others. Consider the list below for some very helpful tax savings strategies as part of your financial planning for the new year.

7 Tax Strategies Every Small Business Owner Should Know

As you close out 2022, hopefully, you’re sticking to your 4th quarter budget through December and are already working on ways to save for Q4 2023. While you’re preparing your business and personal budgets for the coming year, see if you need to incorporate any of these ideas into the financial plan you’re currently shaping to meet your goals for the coming year.

1. Adopt a More Advantageous Tax Payment Strategy.

You may have opted to pay estimated federal taxes this year. If so, presumably, you have been tracking your tax payment amounts. If not, be sure to do that in 2023. Installments for estimated tax are paid in January, April, June, and September. Your quarterly tax payments should be estimated and paid in amounts that will help you satisfy at least 90% to 100% of your total annual liability. That’s essential to avoid IRS penalties for underpayment.

2. Restructure 401(k), 403(b), and Roth IRA Contributions.

Small business owners have multiple alternatives for retirement savings that offer tax advantages. There is your individual 401(k) account. It permits you to save the entire amount of your income as an employee of your liquid waste handling business up to these annual limits:
● Under age 50 = $20,500
● Age 50 or over = $27,000
● As an employer up to 25% of your wage
That means you can contribute up to $61,000 total tax-free until you withdraw amounts after you retire.
You can also save in a Roth IRA.

3. Rethink Your Amount of HSA Contributions.

By year-end 2022, you can put up to $3,650 into your Health Savings Account for an individual and as much as $7,300 for your family’s coverage. Keep in mind that your HSA contributions are not lost if you don’t use the funds for medical expenses. You can let the account grow and use the money later during retirement if you wish. You can take out funds as tax-free income during retirement by withdrawing funds from the HSA to cover medical expenses for the previous year.

4. Use an Umbrella Policy to Protect Your Growing Wealth.

For a small business owner, an umbrella insurance policy can be a powerful protective strategy to avoid serious risk of financial impact from liability claims that may exceed your homeowner’s and auto coverages. Umbrella policies are comparatively low-cost and can deliver major financial benefits when you need them most.

5. Give Tax Deductible Gifts to Loved Ones.

If you have achieved a financial position that causes you now to look for benefits in redistributing some of it for tax savings, consider giving financial gifts to your loved ones up to the legal maximum. This year, 2022, you can still give up to $16,000 per family member to as many of your loved ones as you wish with zero gift tax. This is a way to reduce your estate value and at the same time improve the finances of others in your family.

6. Think About Refinancing Your Mortgage.

Interest rates are currently attractive for refinancing a mortgage. If you haven’t refinanced your home or business property in a long time, there’s an opportunity to do that now and free up more cash flow. Plus, you can potentially reduce your total interest on the remainder of your debt by a significant amount.

7. Use Appreciated Stock to Fund Charitable Contributions.

You can make your charitable donations in the form of appreciated stock instead of using cash. Doing that entitles you to an itemized deduction from your income tax for the year. The charitable organization is not required to pay capital gains tax on the contribution. Afterward, you can purchase the stock again, using the cash you would have donated. It’s a financially efficient way to increase the total amount of investment cost in your portfolio, which is beneficial for tax purposes.

Saving on Your Taxes in 2023

It’s the cumulative financial benefits of applying the above tax savings strategies along with others you decide to implement that can most significantly benefit a small business owner. Of course, commitment to budget, maintaining cash flow month over month, diligently guarding profit margins, and taking calculated risks for growth are other basics for financial success in a small business. Further, consider, at minimum, obtaining upgraded business tax software, and at best, look at using a reputable accounting firm to help you take much fuller advantage of all tax and financial planning benefits you may still be missing in 2023.


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