Maximize Your Business Deductions
If you own a business, being organized is very important. Channel your income and deductions into a single bank account, monitor it on a regular basis, and use a computer program or filing system to sort deductions into categories.
Plan your vehicle deduction.
If you own a large vehicle, you will most likely want to save all of your receipts for expenses to deduct actual costs. If your vehicle is smaller and more economical to run, you will want to use the standard mileage rate of 56.5¢ for 2013. In any event, log your business miles on a daily basis. The deduction for the business use of a vehicle can be substantial, and the proof is in the documentation.
Hire your kids.
For 2013 your child can earn up to $6,100 working in your business before any income tax needs to be paid on the earned income. This can be increased to $11,600 if a $5,500 traditional IRA is purchased. While your child earns tax-free income, you save tax dollars by deducting the wages paid. In the 25% tax bracket, for example, you save $2,900 in Federal tax plus $1,774 self-employment tax by paying a wage of $11,600 to your minor child. Be aware that the work the child does must be appropriate for the child's age and must actually be performed to make this a legitimate expense. For example, you could use the technology skills of your computer-savvy children to help in your business. Keep good records, have a signed employment agreement outlining the work performed, and track the payments into your child's bank account.