Tax Write-Offs: The Beauty Of Being A Business Owner

The tax code broadly applies to two types of individuals: W-2 wage earners (employees) and business owners. When you are a business owner, you qualify for more tax write-offs based on the investments your business makes throughout the year.

Why is that? The tax code favors those who are contributing more to the economy through their business in addition to making business investments that stimulate the economy. Often, business owners also make additional money from investing in other business ventures, oil, real estate, etc. Not only that, but many entrepreneurs have a tax strategy in place to protect their wallets from putting more money in the hands of Uncle Sam. If you are a business owner, you may be in for tax savings if you become knowledgeable in understanding tax strategy and increasing write-offs through strategic investments.

Tax Compliance Versus Tax Strategy

Tax compliance happens from January through April 15 when taxpayers receive their year-end statements in the mail and rush to get their taxes done, often expecting a tax return. This differs from tax strategy, which involves tax planning all year long, keeping sufficient records, making smart investments and utilizing the tax code to save money. In other words, tax strategy involves looking for everything you can do to reduce your tax bill according to tax codes and working with tax professionals and accountants who can help you strategically plan where to invest your money to receive more write-offs.

If you are a business owner looking to create a tax strategy, start by taking a holistic look at where your finances are and where you want them to be. Next, consider your most common expenses, and ask yourself whether those expenses were made in the pursuit of income. Expenses that were made in the pursuit of income can most likely be used toward a tax write-off, such as for a home office, business vehicle, or even meals and entertainment.

Read more: https://www.forbes.com/