Filing taxes for small business owners can be pretty stressful. There are several tax savings strategies for reducing your small business tax liability.

This article discusses seven ways of reducing your taxable income as a small business owner. Kindly read on for more information.

1. Employing A Family Member

Hiring a family member or even your children is a proven method of reducing taxes for small businesses. When you hire a family member, you have access to lower marginal rates and even the elimination of tax on income you pay your children. Furthermore, sole proprietorships do not pay for Social Security or Medicaid taxes on children's wages. However, the payment should be for justifiable business purposes.

You can also hire a spouse that is not subject to the Federal Unemployment Tax Act (FUTA) tax to allow you to reduce tax for your small business. Furthermore, you can put up a retirement savings plan for your spouse depending on the benefits another job provides them.

2. Keeping Adequate Records

As a small business owner, you need to keep thorough and accurate reports all year round, ensuring your tax return is correct. Inadequate record keeping can put you at risk of an audit.

You can also invest in accounting software that keeps track of your income and expenses. The software is usually user-friendly and inexpensive.

3. Starting Your Retirement Plan

There are several retirement accounts options for maximizing retirement savings and reaping valuable tax benefits. For instance, the IRS lets you put away total contributions amounting to $57,000 with the one-participant 401 K plan for your retirement.

As a tax savings strategy, you can check the IRS website for the different retirement plan options for small business owners.

4. Managing Your Payroll

Although you can hire a company to handle your payroll, you have to ensure they are reputable. A payroll company helps remit your taxes. It is best to avoid hiring lesser-known payroll services just because they are less expensive.

5. Saving Money for Healthcare Needs

Putting money aside for health care needs can also reduce taxes for small business owners. Because medical costs keep increasing, you must save money for unexpected health care needs even if you are healthy at the moment. If you have an eligible deductible health plan, you can save money for your healthcare needs by obtaining a Health Savings Accounts (HSA). HSAs help business owners and employees reduce their taxes and associated medical costs. The savings also give you a triple tax advantage, which means that your contributions are pre-tax and grow tax-free. Also, you can make tax-free withdrawals for qualified medical expenses. 

6. Changing Your Business Structure

Small business owners don't have the benefits of an employer paying part of their taxes. You have to pay the entire amount of your Medicare and Social Security taxes as a small business owner. If your business is a Limited Liability Company (LLC), you have to pay the taxes. However, in some circumstances, you may eliminate half of your tax responsibilities.

As a small business owner, you can switch to an LLC. Nevertheless, you have to pay yourself a reasonable salary and associated risks.

7. Deducting Travel Expenses

As a small business owner, traveling a lot can reduce your business. Although business travel is fully tax-deductible, personal travel is not. You can, however, maximize business travel by combining personal traveling with a justifiable purpose.

You can also redeem any frequent flyer miles you earn from business travel for personal travel.

Conclusion

As a small business owner, reducing your taxable income requires planning. Although reducing your taxes can help keep your money, you should contact a tax professional to ensure you qualify for potential savings.