1. Start-Up Costs: Start-up costs are amounts paid or incurred for investigating or creating your business. Those that are paid or incurred before the actual business start date are amortized over a period of years, whereas costs incurred on or after the business start date are fully deductible in the year they were incurred. By planning for the earliest possible start date for your business, you may be able to convert some start-up costs to current year tax deductions and accelerate your tax savings.
2. Retirement Plans: Defer income taxes through retirement plan contributions. Sole proprietors typically have access to more retirement account options with often greater contribution limits. Common business retirement accounts include SEPs, SIMPLE IRAs, defined benefit pension plans, defined contribution retirement plans, and solo 401(k) plans.
3. Health Savings Accounts (HSAs): HSAs allow eligible individuals and families to save for, and pay, health care expenses on a tax-free basis. Unlike a flexible spending account (FSA), HSA funds roll over and accumulate year over year if they are not spent. Interest and other earnings accumulate tax free. In order to contribute, you must be enrolled in a qualified high deductible health plan.
4. Business Travel: Plan vacations around business trips to convert some costs of nondeductible vacation travel into business travel.
5. Hire Your Children: Children under the age of 18 working for a parent-owned unincorporated business are exempt from FICA taxes.
PagnatoKarp provides comprehensive tax services, including preparation, projections and planning. For more information, please visit our Tax Page.
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