a. Claim the deduction your business is eligible for i.e. home office expense, car expense etc.
b. Take advantage of income splitting business: In United States income splitting has been built into the tax system. The US has separate tax rates based on marital status. Married couples are allowed to file a joint return, which has lower tax rates than singles, when one member earns significantly more than the other.
c. Incorporate your small business if it will save you money
On the amount of income we get from the business, we have to give certain portion of it to the Government as Tax. It’s compulsory for most of the businesses coming under Government rules, but do you plan on how much tax needs to be submitted? Or, if there is any way to reduce your tax liability. No? Here are some tips which will help you plan your tax.
For an effective tax strategy claiming deductions are must. The most common deductions for businesses are home-office expense and car expense. If you have a home-office or work in home having a separate room dedicated for your business, you can claim that portion. Also, the expenses done for a business trip by your car can be claimed like, fuel, parking, toll charges, etc.
U.S and Canada both use marginal tax system which means the more you earn, the more you have to pay as tax. So, if you are the only member in the family and earn a great profit you will have to pay higher tax. Like if your annual profit is $2,00,000 your taxable rate would be 46.41% as per Canadian system. But if you show your wife or children working for you, your income will be split and you will pay lesser tax.
There are a bunch of benefits you can have by incorporating your business. But you must think how and how many benefits you will get by incorporating. Like in Canada, business that incorporate gets benefit of small business deductions. So, plan wisely and get benefits.