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 57.5¢ for 2015. 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 2015 your child can earn up to $6,300 working in your business before any income tax needs to be paid on the earned income. This can be increased to $11,800 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 $2,950 in Federal tax plus $1,667 self-employment tax by paying a wage of $11,800 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.
Use a home office.
If your home is the only location in which your business is conducted, set up an area exclusively used for business. You’ll be able to deduct a percentage of your household expenses.
