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5 Ways to Lower Your Small Business' Tax Rate

By Brett Snider, Esq. | Last updated on

For Tax Day, here's something for small business owners to consider: Your business could be paying much less in taxes by taking some tips from big corporations.

Some of America's most profitable companies like Apple and Microsoft have effective tax rates lower than 30 percent, as Forbes points out.

So what can you do to effectively lower your small business' tax rate? Here are five ideas that may pay off for you:

  1. Reorganize for tax purposes. There are any number of ways in which you can legally organize your small business, and even incorporating can lead to a myriad of options. If you consult an experienced tax attorney, he or she can advise you on the best way to organize your business for tax purposes, whether it's an S-corp or an LLP.
  2. Mind your investments. Capital gains taxes don't just affect the wealthiest 1 percent, they can also significantly increase your business' tax burdens. This doesn't mean that your company shouldn't invest, but you should be aware of the impact that each investment will have on future tax years. In some cases, you may be able to carve out some investment gains as tax-free, but these loopholes don't stay open forever.
  3. Don't forget the home office deduction. If you've requested a tax-filing extension, it's still not too late to consider the home office tax deduction. This write-off has been significantly simplified over the last few years, and you don't have to work only in your home to claim it.
  4. Claim your Obamacare tax credits. These credits aren't available to the big corporations, but you may be able to get an Obamacare tax credit for your small business. If your small business provides your employees with affordable healthcare through the Small Business Health Options Program (SHOP), you may be able to have the government pay for some or all of your employee insurance premiums. This may just be a better long-run option than shifting all employees to part-time.
  5. Spread out your gains. BusinessNewsDaily reports that you can lower your tax rate by spreading out gains over several years. Instead of taking the sale of a business asset or investment in one large lump sum, consider taking the sale in installment payments. This may help you avoid meeting certain investment income tax thresholds by only receiving a small amount each tax year.

Thinking ahead in tax terms can help ensure that your small business can continue to thrive. To learn more, check out FindLaw's section on Small Business Taxes.

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