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8 Ways Owning a Business Can Be Your Ultimate Tax-Saving Strategy

Writer's picture: Rebecca SchugRebecca Schug

Owning a business isn’t just about being your own boss or pursuing your passion; it's also a powerful tool for optimizing your financial life, especially when it comes to taxes. Entrepreneurs and business owners enjoy a range of tax benefits that can significantly reduce their overall tax burden. Let’s explore 8 ways owning a business can be a tax-saving strategy.


1. Business Expenses:

One of the significant advantages of owning a business is the ability to deduct legitimate business expenses from your taxable income. This includes office space, equipment, supplies, employee wages, and even business-related travel expenses. By deducting these costs, your taxable income decreases, thereby reducing the amount you owe in taxes.


2. Depreciation:

Business owners can depreciate the cost of assets like machinery, vehicles, or office buildings over time. Instead of expensing the entire cost of an asset in the year it is purchased, businesses can spread the cost over several years. This depreciation expense reduces your taxable income each year, providing substantial long-term tax savings.


3. Home Office Deduction:

If you operate your business from home, you may qualify for a home office deduction. This allows you to deduct a portion of your home-related expenses, such as mortgage interest, utilities, and insurance, based on the size of your home office. It's a valuable deduction for small business owners and freelancers.


4. Healthcare Benefits:

Business owners can often deduct the cost of health insurance premiums for themselves, their spouses, and their dependents. This deduction not only reduces your taxable income but also encourages entrepreneurs to invest in their well-being. Business owners also have the benefit of negotiating and choosing their own health plan and the right plan for their employees which can help with recruiting new employees and retaining high quality employees.


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5. Retirement Contributions:

Business owners have access to a variety of tax-advantaged retirement plans, such as SEP-IRAs, SIMPLE IRAs, and 401(k)s. Contributions to these accounts are tax-deductible, lowering your taxable income while allowing you to save for the future.


6. Pass-Through Deduction:

The 2017 Tax Cuts and Jobs Act introduced a significant tax break for business owners. Certain qualifying businesses organized as pass-through entities, like S corporations, partnerships, and sole proprietorships, can deduct up to 20% of their qualified business income. This deduction can result in substantial tax savings for eligible entrepreneurs.


7. Tax Credits:

Some businesses qualify for various tax credits, such as the Research and Development Tax Credit or the Small Employer Health Insurance Credit. These credits directly reduce the amount of taxes you owe and can lead to significant savings for your business.


Which Tax credits you qualify for will be dependent on the nature of your business. Meeting with a qualified tax professional like Levelheaded Bookkeeping can help you discover which ones you might qualify for.


8. Estate Tax Planning:

Business ownership can also play a crucial role in personal estate tax planning. Properly structured, a business can be passed on to heirs with reduced or eliminated estate taxes, preserving your wealth for future generations.


Let Us Help You with Your Tax Saving Strategy

Owning a business offers a multitude of tax advantages that can substantially lower your tax bill and enhance your financial stability. From deducting business expenses and utilizing depreciation to taking advantage of tax-advantaged retirement plans and tax credits, the benefits of entrepreneurship extend far beyond profits and passion.


If you’re considering starting a business or already own one, it’s essential to work with a qualified accountant or tax professional like Levelheaded Bookkeeping to maximize these opportunities and ensure you’re taking full advantage of the available tax-saving strategies.


By leveraging the tax benefits of business ownership, you not only invest in the growth and success of your enterprise but also in your own financial well-being.




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