In with the New in 2022 🎉!
This is a great time of the year for tax planning – because it’s PROACTIVE and well-timed. Make sure these tax-reducing ideas are on your radar for 2022. This is not a new list, but reviewing it will help remind you of these business deductions for your tax return. You want business deductions because business deductions reduce both your income and, if applicable, your self-employment taxes.
Checklist of some tax-planning ideas:
- Eliminate the word “friend” from your vocabulary. From now on, these people are sources of business, so start talking business and asking for referrals over meals and beverages.
- Hire your children. This creates tax deductions for you, and it creates non-taxable or very low taxed income for the children. Also, wages paid by parents to children are exempt from payroll taxes.
- Learn how to combine business and personal trips so that the personal side of your trip becomes part of your business deduction under the travel rules (for example, traveling by cruise ship to a convention on St. Thomas).
- Properly classify business expansion expenses as immediate tax deductions rather than depreciable, amortizable, or (ouch!) non-deductible capital costs.
- Properly identify deductible start-up expenses ($5,000 upfront and the balance amortized) rather than letting them fall by the wayside (a common oversight).
- Correctly classify business meals that qualify for the 100% deduction rather than the 50% deduction.
- Know the entertainment facility rules so your vacation home can become a tax deduction.
- Identify the vehicle deduction method that gives you the best deductions (choosing between the IRS mileage method and the actual expense method).
- Correctly identify your maximum business miles, so you deduct the largest possible percentage of your vehicles.
- Qualify your office in your home as an administrative office.
- Use allocation methods that make your home-office deductions larger.
- If you are married with no employees, hire your spouse and install a Section 105 medical plan to move your medical deductions to Schedule C for maximum benefits.
- Operate as a one-person S corporation to save self-employment taxes.
- If you are single with no employees, operate as a C corporation and install a Section 105 medical plan so you can deduct all your medical expenses.
The Bottom Line
Tax Planning is very important to both your business and your personal finances. We believe and know that tax is a service, not an event. Once a year just doesn’t cut it and the above are some highlights to keep your tax planning rolling all year long, not just during tax time to file the return. If you don’t understand some of what we share or you want to discover if there are more that will fit your circumstances, talk with your tax pro while it’s still early in the year.
