Business-Minded Legal Solutions

Smart strategies to decrease your business tax burden

Updating the structure of your business and making other savvy financial moves can optimize the company’s tax savings. Tax planning focuses on adhering to complex laws and regulations while taking advantage of provisions to decrease the percentage of profits you must divert to the IRS.

Consider these strategies to lower your organization’s tax burden.

Restructure your legal business entity

The Tax Cuts and Jobs Act reformed the corporate tax rate from a sliding scale of up to 35% to a flat rate of 21% for all C corporations. As a result, some companies can save by switching from a limited liability company or a partnership to a standard corporation. However, you will be subject to double taxation. Specifically, on income at the corporate level when the company earns income and at the individual level when you distribute income to investors and owners. Retaining profits within the company can help reduce the burden of double taxation.

Update accounting methods

Under the Tax Cuts and Jobs Act, more companies than ever before can potentially take advantage of savings by changing their official accounting method. The maximum threshold to qualify rose from average gross receipts of $10 million over the previous three years to $25 million over the previous three years. You can receive automatic approval for these changes when your company opts for the cash method of accounting, inventory method, uniform capitalization rules or completed contract method.

Make charitable donations

Supporting a local community initiative or a national or international nonprofit organization will result in tax savings. You can deduct the full amount of check and cash donations from your company’s taxable income. Donations of real estate and other assets result in a tax deduction equal to their assessed market value.

These are just a few of the many ways businesses can save on taxes with careful planning. Comprehensive knowledge of the complicated tax code will inform the best decision for your specific company.