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6 Best Tax Write Offs for Small Business

The 6 Best Tax Write Offs & Tax Reduction Ideas for Small Business

Best Small Business Tax Write Offs

What are the Best Tax Write Offs for Small Business?

We get this question quite a bit.

What are good tax deductions for small businesses?

How can construction companies reduce taxes?

(this is not legal tax advice, or investment advice, it's meant to spur you towards booking a consultation)

What are the best tax write offs for small business owners?

Well, the best write offs for Small Business is less about individual things to purchase, and more about doing pro-active tax planning.

We help businesses with their accounting, bookkeeping & tax, but most of all, we help provide pro-active tax guidance.

Sorry for the Bait & Switch - Here's 6 Major Tax Reduction Strategies

Rather than sharing lists of business services, vehicles, home office and others - we want you to know how we really move the tax needle.

If your accountant isn't providing aggressive, year-long tax reduction planning, then you're probably overpaying in taxes quite a bit.

If your accountant isn't coming to you with ideas about how to lower your taxes, we can almost promise that you're missing out.

6 Best Tax Write Offs & Tax Reduction Ideas for Small Business

We don't want to waste your time, so here's the 6 best tax deductions for small businesses and their owners

#1 Best Tax Reduction Idea - S-Corp Conversions

Not every business is right for an S-Corp, but most small businesses might benefit.

This isn't really a tax write off, but it's a major tax reduction strategy.

Schedule C vs. S-Corp

If you're not an S-Corp, chances are you're missing out and paying unnecessary Social Security taxes & Medicare taxes.

If you're not an S-Corp, chances are that 100% of your net profits are subject to the 15.3% Self-Employment taxes.

12.4% is Social Security Tax

2.9% is Medicare Tax

These two taxes can hit you pretty hard as a small business.

You'll owe 12.4% Social Security Tax on all qualified income up to the SS limit, which changes each year.

If you had $100,000 in net profit and schedule C income, you'd owe $15,300 in SE taxes.

That's a $1,275 a month payment!

S-Corps Might Help Reduce Social Security & Medicare Taxes

Schedule C, or Sole Proprietors, can convert to an S-Corp using a 2553 form.

There are rules and additional bureaucracy when you open an S-Corp, and we pride ourselves in delivering amazing accounting & tax to support this - so book a consultation to make this easy.

Split Your Income Between a Reasonable Salary & Owners Distribution

You'll actually setup a payroll system, and then pay yourself as an employee.

Your salary is subject to the 15.3% Social Security & Medicare Tax, but the rest of it, is not.

Salary - Subject to 15.3% SE Tax
Distribution - Not Subject to 15.3% SE Tax

You'll have to pay yourself a "reasonable salary" , which needs to line up with the activity you perform in your business, the way you would be someone for that position, and many other factors.

Things you need for an S-Corp:
  • Reasonable Salary
  • Payroll System
  • 1120S Tax Return
  • Shareholder Meetings, agreements & more
  • Comply with many other S-Corp rules

Long Story Short - You Might Save Thousands

You'll want to call us and get real tax advice here, but we'll just let you know that S-Corps can create thousands a year in tax savings.


Schedule C Income - $100,000


S-Corp Setup:

Salary - $70,000

Distribution - $30,000

Tax Savings would be around $2,000 to $4,000, depending on what decisions where made with the QBI tradeoffs.

The first and best tax write off for most business owners, is to become an S-Corp and maximize it's benefits while obeying all of it's rules.

#2 Best Tax Reduction Idea: Retirement Plans

Write Off $52,000 & Invest It in a Retirement Account!

Business owners & self-employed people can utilize a business retirement plan.

Business Retirement Plans:

Business Retirement Plans are such good tax write offs because of their "employer contribution".

Remember that "match" you used to get from your employers?

That match was an example of an "employer contribution".

These employer-side 401k matches, profit shares and other contributions are very tax advantaged.

You can often make employer contributions of up to 25% of your S-Corp Salary, or of your Schedule C Income (rules apply).

If you took a $70,000 salary, you might be able to make a 25% contribution to a SEP IRA or the employer contribution to your S-Corp!

That's a $17,500 tax write off, using an employer-side contribution.

There are rules to each investment account and depending on your salary, income, structure and employee type - you'll have many more rules and constraints.

You don't need a big company for a retirement plan!

We often see folks call Vanguard or Schwab, who are large firms that provide low-cost index funds and solutions, and get really good advice.

So if you're a business owner looking for the best tax write off possible, you'll want to look into a small business retirement plan.

#3 Best Tax Reduction Idea: Hiring Your Kids

If you're minor children come work for you, they might be a massive tax reduction strategy.

Now, your kids would actually have to work for you, they'd have to get paid appropriately, and a host of other conditions - but we can handle that for you.

Why is hiring your minor children such a good tax write off?

Kids Can Use the Standard Deduction!

Since they'll have their own tax return, they'll claim the standard deduction, which is $14,800 in 2024.

That means they'll be nearly tax free for all income up to that standard deduction.

You're in a higher tax bracket than your kids, so they would provide some relief.

Not only that, but there are additional tax spiffs if you're not a corporation, and you remain a sole proprietorship (contrary to the advice above).

Long story short - you should give your child a legit job, and let them earn tax-efficient income.

They can invest in a ROTH IRA with that income!

#4 Best Tax Reduction Idea: Rental Real Estate

Buy & Hold real estate offers many advantages.

You could buy real estate, like a commercial building, office building or even a duplex - and have your S-Corp office out of the building and pay rent.

  • Income form Rental Property Is NOT subject to Social Security or Medicare Tax
  • You can utilize depreciation to mitigate taxable income
  • You can use the bank's money to purchase a potentially appreciating asset
  • You can have your business rent from the real estate business & mitigate SE taxes
  • You'd enjoy another asset class, improving diversification

Buy & Hold Real Estate isn't exactly a business write off, but it's a long-term wealth building and tax reduction strategy that's worth planning for.

It's worth noting that the down-payment and principle loan payments are NOT deductible, but instead, you'd depreciation a portion of the property over 29 or 37 years.

Many business owners enjoy building wealth with real estate alongside their regular business!

#5 Best Tax Write Off: Benefits & Fringe Benefits

The fifth best tax write off is your health insurance premiums, your HSA contributions and other fringe benefits.

We wont spend much time talking about the complexities of this, but your business can enjoy a series of tax efficient benefits for employees.

If you're looking for major tax reduction opportunity, you should work with us to identify the best benefits.

#6 Best Tax Reduction Idea: Pro-Active Planning of Tax Brackets

Remember, the money that's "left over" in your business bank account will "pass through" and be taxable.

The final and most important tax reduction strategy is just to be pro-active with a tax reduction planner.

Business owners often want to fuel growth, rather than take income that pushes them into a higher tax bracket.

Marginal tax rates mean that sometimes it's much more beneficial to make purchases inside the business, rather than take the income.

When you work with us, we'll guide you to never overpay in tax and avoid major spikes in income.

It's all about paying tax once, and paying it in the lowest tax bracket possible; while achieving your goals.

If you're not intentional throughout the year, you accidentally pay tax in high tax brackets.

We Provide Tax Planning with Bookkeeping & Tax Returns

When you work with Charter Consulting & Accounting, we'll be your outsourced accounting team.

That means we'll handle your bookkeeping, provide pro-active tax planning and then file your year end tax returns.

We'll ensure you never overpay in tax, and we'll help you grow into the caliber of business you dream of!

Lower taxes, pristine books, excellent customer service & year-end compliance made simple!

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