Small businesses in Sugar Land, Texas, are increasingly becoming popular, and many small business owners are enjoying huge profits due to this business-friendly environment of Texas. However, the sales tax rate of 8.25% in this city is increasing the stress of small business owners who are looking for a way to reduce their taxable income.
If this is the case for you, then read this post, which mentions some effective ways to reduce taxable income. Also, you can consult with the professionals who offer business advisory in Sugar Land, TX, if you have any further queries.
Effective Ways To Reduce Taxable Income –
1. Analyse the right time to pay
If you can evaluate the profitable years of your business, then you can save some extra dollars on tax payments. To do this, you have to analyze the sales pattern of your business, check when it will hit the most profit, and pay your taxes during that year. Until then, you can delay your tax payment. To simplify, you should pay your tax in the year you think it will be deductible.
2. Make donations
If you have decided to contribute your money to a charitable cause, then you have an opportunity to reduce your taxable income. However, this is only possible if the organization is tax-exempt and comes under section 503 (c )(3). These organizations can be non-profit educational institutions, volunteer fire companies, etc. To verify if the organization is tax-exempt, you can verify the status of the organization with the IRS-exempt organizations by selecting the check tool.
Make sure you document the charitable contributions to utilize these recipients during the tax payment period.
3. Contribute to retirement plan.
You must be already contributing to the 401 (k) and IRA plans to secure your life after retirement. So, you can use these plans to reduce your taxes by contributing a higher amount to these retirement plans.
For this, you have to contribute up to $23,000 to your 401 (k) or 403 (b) retirement plans. However, if you do not have a 401 (k) retirement plan, then you can contribute to the traditional IRA plan up to $7000 to reduce your taxable income.
4. Contribute to HSA
You can utilize your HSA plan to save your income from heavy taxes. To do this, you will contribute more to the HSA account. The HSA account is a tax-exempt account and allows you to utilize your money on medical payments completely without cutting off any amount.
Furthermore, you can select your plan and contribute accordingly. For instance, the self-only high deductible plan of HSA provides a $4150 contribution limit. On the other hand, the family deductible plan provides up to a $8300 contribution limit as of 2024 in Texas.
5. Make use of W-4 paychecks.
Utilizing the W-4 paycheck is another smart way to save your taxable income. All you have to do is to analyze when to increase or decrease the tax withholding. For instance, you should increase your tax withholding amount if your tax bill was huge last year. In contrast, do the opposite and reduce your withholding if you got a good refund last year.