Tax Benefits for Businesses

By Kurt A. Schindler, PhD, CFP®* As a business owner you must maximize your company’s performance. This will ensure that your business produces enough income to save and invest. To do this, you must consider permanent costs, which include taxes and duties. Your goal should be to decrease your tax payment and increase your business’ tax benefits. Over the years, I have seen a long list of suggested expenses that can be deducted from the tax return. But be careful, an expense is ideal if the purpose is not simply deducting that expense. There must be another purpose. For example, a business owner has the option of purchasing a luxurious or an economic car for company use. The owner could consider buying the luxury car because maintenance and gasoline expenses can be deducted on the tax return. But beware, because it is likely that an affordable car can fulfill the same function without hitting the wallet as hard. If the business owner spends $5,000 on maintenance for a luxury vehicle and the income level for tax purposes (tax bracket) is 23%, the savings will only amount to $1,150. The important thing is to verify if the company can produce the income to pay for that expense. There are other examples of business expenses that promote benefits for the owner, such as retirement plans. By contributing to a retirement plan you obtain a tax benefit and save capital for your future. The important thing is finding a way to make disbursements with tax benefits and a real purpose for your financial well-being. Talk to your tax advisor for more ideas on this concept. Remember that the key is that your business produces and that you can capitalize on that benefit for your financial future. Kurt A. Schindler was Financial Education Director at Banco Popular de Puerto Rico (“Popular”) until January 2017. Schindler is a Certified® Financial Planner and holds a PhD from Kansas State University in Personal Financial Planning. This article is for informational purposes only and does not constitute endorsement or guarantee of accuracy or applicability for any particular purpose. Neither Popular nor any of its affiliates, subsidiaries, or related companies is or will be responsible for any special, direct, or indirect damages arising from the information contained in this article. Should you require further information or guidance on the subject of this article, you should always seek the advice of the competent professional of your choice.