Underutilized Tax Strategies

June 1, 2020
By: Mike Bruner

My topic today, 3 Underutilized Tax Strategies, builds from a previous blog post of mine called Setting Up For Success.  After you have your business setup – how do you best strategize to save on taxes?  Below I will highlight 3 Tax Strategies that I feel are underutilized in large part because many people are unaware of them or do not understand them.  Not all of them are applicable to every business, but some of them might be applicable to yours.

  1. Paying your dependents – are your kids at an age where they can provide useful services to your business such as cleaning, shredding, filing documents, or answering phones? If so, did you know you can pay them up to the standard deduction amount ($12,400 for 2020), and in many cases have that be tax-free to them and count as a deduction for your business?  This lowers your taxable income without creating a tax liability for your child.  With the right entity structure, it may also be free from payroll taxes.
  2. Corporate Retreats – executives of big companies such as Nike, Google, and Amazon are undoubtedly doing some business travel to have executive meetings, are you? If not, maybe it is something you should consider.  The executives of your company may just be you and your spouse, but that does not mean that a corporate retreat cannot happen.  With the right purpose (like a convention), location (usually lower 48 states), and records, it might be something worth looking into, as that business trip could be 100% deductible.  However, keep in mind that meals are 50% deductible and entertainment is 0% deductible.
  3. Business Use of Personal Items – obvious deductions for a business are things directly related to the business. But what about your personal cell phone?  Personal laptop? Personal vehicle?  I get asked a lot of questions about these items – especially from “smaller” business owners.   These items are deductible to the extent that they are used for business.  Some that I see fairly frequently are:
    • Cell Phone
    • Home Office/Home Internet
    • Mileage on a personal vehicle
    • Per diem/travel meals
    • Tools
    • Laptops and Computers

The key consideration in the above items is that they are (or were) personal items that you are contributing in full or in part to the business.  If you have items that fall into that category, then it may make sense to start deducting those and to keep the proper documentation to support the deduction.

Again, the above three items may not be applicable to your business.  However, if you think that any of them might be then feel free to give us a call or shoot us an email and we can tell you what records you need to keep to maximize the tax savings opportunity.

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