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What is good about tax season?

On Behalf of | Mar 9, 2019 | Firm News |

Most Americans do not look forward to filing taxes. However, if you know what your options are, you may be able to use the law to your advantage to reduce your tax liability.

As a business owner, you might appreciate new legislation regarding tax breaks beginning with the 2018 tax season. In layman’s terms, you might be interested in new Section 199A tax legislation which includes:

  • The 20 percent pass-through deduction – If you are a business owner, you can now deduct an amount equal to 20 percent of your qualified business income. This applies up to a taxable income up to $207,000.
  • REIT and PTP deduction – You might qualify to combine your pass-through deduction with another deduction for 20 percent of your qualified real estate investment trust (REIT) dividends and income earned through a publicly traded partnership (PTP).

While these might be ways you can benefit through lessening the amount of taxes you are required to pay, there could be additional ways for you to reduce your tax liability.

It may be wise to explore your options

You are probably aware of many of the ways you can lower your tax rate. However, there are three common strategies the wealthy utilize during tax season.

  • Structure creation – A limited liability company (LLC) can help you manage your investments. Forming an LLC could also allow you to deduct certain expenses.
  • Estate and gift deductions – Through 2025, you can now deduct just over $11 million in estate or gift deductions. Depending on how much money you would like to set aside, you might consider establishing a long-term trust.
  • Donations – Many Americans deduct donations to charity through an itemized tax return. However, you might be able to write off a larger amount for putting a conservation easement on a piece of land.

These are good options to remember when you file your taxes. However, they might also be good to consider as you grow your business throughout the year.