The old adage “You don’t know what you don’t know” applies to many areas of life, including what you can claim on tax. Small business owners are generally well clued up as to what they can claim as a tax-deductible expense, but they may not know about all legal ways to minimise their tax obligations.
Here are just three little-known ways how you can reduce your tax bill. It only requires a little forethought and putting a system in place to make sure that all relevant receipts and expense documentation are being collected throughout the year. You’ll be surprised how much tax you can save this way and the results will be worth it!
1. Writing Off Your Child’s Education Expenses
Getting your kids through school, college and maybe even university can be a drain on the hip pocket. But there’s a silver lining, and it is good for business and reduces your tax bill. Put your child on the payroll! Yes, I am serious. This is such a great way to help your child learn how to handle and appreciate money, when they work for what they earn.
And on top of that, you are reducing your taxable income for yourself and your business. You’ll be amazed how quickly this adds up, for both of you. Think about the possibilities you have in your business, you could organise for your child to come in 4 hours or more per week to perform office chores, or other business related tasks like cleaning services, or routine copying, filing and typing, the list goes on and only changes by the nature of your business.
Your business can deduct wages paid to your child provided the amount is reasonable and for bona fide work. And if you are a sole proprietorship, you will eliminate self-employment tax on the income as well.
2. Deducting Vacation Travel Expenses
Try to combine business (a meeting with a client or possible client, checking out some material or resources for your business, etc.) with your vacation travel. As long as your trip is documented in advance, showing an intent to build your business in some way, your travel expenses become business expense deductions.
Meals, hotel rooms, plane tickets, car rentals, and even certain expenses for entertainment are deductible as business expenses with proper documentation.
3. Deducting Phone, Internet Service, and Utility Bills
If phone calls, Internet service, or utilities are used for legitimate business purposes, then, with proper documentation, they become tax deductible business expenses. If you have a credit or debit card solely for your business, and you probably should, the annual fees and interest payments are also tax-deductible business expenses.
Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Copyright © 2017 Robert Bauman.