Operating a business in Virginia certainly comes with its perks, but just like in every other state, there are tax laws and guidelines to become familiar with. Entrepreneurs based in Virginia can do business without a reseller’s license and the tax code is relatively lenient, but obviously we’d all like to save more money when possible. If you’ve been looking for ways to reduce your annual tax bill, check out the following tips for starters.
File Business Travel Costs as a Deduction
If you’re doing any travelling as part of your business, even if it’s just local commuting, keep track of the costs involved, whether it is filling the gas tank of a company vehicle or booking a flight to an out-of-state meeting. Likewise, if you have employees who work in the field and are regularly commuting or travelling, you can file the cost of that travel as a deduction as well. When you calculate the amount that can be spent on this alone during the year, it’s easy to see how filing this as a deduction can greatly improve your tax return.
Make Retirement Plan Contributions
Contributions to an employee retirement plan is a cost that can be filed as a deduction. Even better is the fact that this money is only taxed when it is taken from the plan, which typically happens at the point of retirement. This is an ideal option for lucrative businesses that have multiple employees.
Choose a Proper Business Structure
Most small businesses start out with the LLC corporation structure. However, as time passes, and your revenue increases, it may make more sense to change the structure to a C corporation, as this would give you a tax rate of 15% on the first $50,000 of annual income. Changing to a C corporation is a move that is particularly beneficial if you’ve reached a significantly higher tax bracket, as staying an LLC at that point would cause you to face higher tax rates.
Increase Benefits Instead of Giving Raises
While giving employees a raise is what most of them would prefer, you can’t file deductions for the money paid on raises and all that additional payroll expense incurs extra taxes. Therefore, you may want to consider paying more into their benefit plans instead, as that money does not incur FICA, Medicare, and income taxes. For example, instead of paying an employee $300 extra per month, you could make it known that they’ll be receiving an additional $300 payment towards better employee health insurance.
Consult with a Tax Specialist to Discuss All Possible Deductions
In closing, while the above recommendations will definitely allow for a notable tax bill reduction, if you really want to maximize the amount you’re able to save then it would be wise to consult with a tax or accounting specialist in your area. A competent tax expert or accountant will be able to help you assess and take advantage of every possible deduction that you may be eligible for.
Share
Contributors
