3 Best Kept Secret Tips To Reduce Your Tax Bill For 2022 For Online Ecom Owners!
I hope these tips will help you keep you guys alert out there and ensure you take full advantage of these when you are looking into filing your taxes. Now I want to caveat this by saying that I specially formulated these tips to be those that you would still have time to implement now that we are in 2021, as the best tax planning happens during the year, so in this case, 2020.!
401K And Personal Income
So the first tip I want to share with you to help reduce your taxable income is to take advantage of the various retirement plans available, as many of these will help reduce the taxes you must pay this year.
One of the best ones, no one talks about, is the solo 401K. This is for business owners with no employees other than their spouses and is quite impressive because you can contribute as both the employer and the employee. That means you can contribute get this…up to 56,000 a year!
Yes, you can essentially shield 56K of revenue this year from taxes if you use this. There are other plans just like this if you have employees in your company and even ways to offer your employees a similar project to put money into their retirement plan, making you look like an incredible boss in the process.
The 2nd tip we would like to share is to make sure you take advantage of the mileage deduction for all your business travels in 2020. Most things would qualify for this. Instead, taking a trip to the post office, meeting with clients, doing errands to pick up supplies, or even going to a business conference or mastermind would all count towards this. So for every mileage you traveled, you get to take 57.5 cents as a tax deduction, which can add up if you did a lot of traveling in 2020.
Just make sure to create a log of all the dates, destinations, and the reason for travel. There is, of course, another way to take this type of deduction called the actual method which lets you calculate the actual cost of using your vehicle. Still, given that this video is shared with you, there are easy tax deductions that you can take advantage of, so we won’t go too much into the other method. But feel free to let us know if you are interested in learning about that; we can share some tips too.
Home Office Deductions
So our last tip for you is the opposite of the previous one. This is realizing that due to COVID-19, many of you may have canceled all your big or small travel trips the last year, downsized your office, and decided to work from home; this tip is for you! So the question we have gotten from our agency a lot this past year is, I am working from home; what kind of deductions can I take?
The good news is we want to tell you if a home office deduction is available to all business owners. To qualify for it, you must meet two requirements 1. Regular and exclusive use, meaning whatever space it has to be for business use only, must be your business’s principal place. After you meet those two requirements, there are two ways to take this deduction, just like with mileage. There is a simple way: take 5 dollars per square foot for up to 300 squares of your house.
And the Actual expense deduction is, as you guess yo, you can deduct the actual % of business use that your business takes up and take a portion of all of these categories, such as utilities, business insurance, and rental insurance premiums. But this is worth looking into, especially if you know you are taking up more than 300 square feet of your house for your business and can prove that you are using a significant % of your home for business purposes.
So make sure you get an accountant that will check both ways for you, especially if you have a large office setting, as there are some significant deductions waiting for you to take if you have someone who cares for the well-being of your financial future.