As a business owner, you know that minimizing your tax liability is crucial for your company’s financial health, but navigating the complexities of tax planning can feel like trying to find your way through a maze. It can be difficult to maintain a clear line of sight around the full financial picture for your business and the implications that has for your tax burden. The midpoint of the year is a great time for businesses to evaluate their financial strategies and explore opportunities to maximize year-end tax savings.
As has been said by many, if you don’t plan to save, you plan to pay. Consider these 5 tips for maximizing your tax savings in 2023.
Leverage all available tax deductions and credits
When it comes to taxes, financial incentive opportunities at the state and local level are often available to help reduce your obligations, but the compliance needs are always evolving and meeting the qualifying criteria can become complicated, especially if you do business in multiple cities/states. Capital expenditures, research and development, along with hiring and training new staff are just a few ways you may be eligible for tax credits. The credits and incentives that are available can greatly reduce your tax liabilities and provide access to funding for your projects.
Plan for depreciation and capital expenditures
Strategically planning your capital expenditures can have a direct impact on your tax liability. Timing is everything! You may want to expedite a purchase before the end of the tax year to accelerate depreciation and claim deductions sooner. Conversely, it may be in your best interest to delay a purchase until the following year to defer depreciation and reduce taxable income in the current year. It’s also important to be mindful of the specific asset categories and their depreciation recovery periods. For example, certain assets may be eligible for bonus depreciation or have shorter recovery periods, allowing for accelerated depreciation.
Optimize retirement contributions
You will reap both short- and long-term benefits when you maximize your retirement contributions. The reduction in taxable income can lead to significant tax savings by potentially placing you in a lower tax bracket or making you eligible for various tax credits and deductions, benefiting both your business and personal financial situation. The tax advantages associated with retirement contributions serve as an incentive to save while lowering your current tax burden.
Stay compliant with state and local taxes
Staying compliant with state and local tax regulations is essential for maximizing overall tax savings. Sales and use tax, payroll tax, state income tax, property tax, business license and franchise tax are just a few examples of state and local regulations that require ongoing attention and adherence to changing laws. The complexities of tax code and simple errors in compliance can result in hundreds of thousands of dollars in additional costs. Have you ever had a tax compliance review done at your company? If you conduct business in multiple states, it’s recommended to partner with a tax professional so that they can provide guidance specific to your industry and location and help you navigate the complexities of state and local tax planning.
Seek expert tax guidance
If you are feeling lost in the maze of tax planning, consult with a tax professional who can help you create a strategy to optimize your year-end plan and minimize your tax burden. Starting early provides your business with the opportunity to proactively manage any tax liabilities, optimize tax-saving strategies, and align your financial goals with tax obligations. Taking a proactive approach with an expert by your side will give you an overhead perspective of the maze allowing your business to achieve greater tax efficiency and potentially save significant amounts in taxes.
At BerganKDV, we understand the challenges businesses face when it comes to tax planning. Our team of experienced professionals is here to help you at every step of the process. Don’t navigate the maze alone! Together, we can develop a customized tax strategy that maximizes your year-end tax savings and positions your business for long-term financial success. Contact our team today to get started.
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