Weekly Tax Tips June 10th

Trivia Question❓

Answer at the bottom of the newsletter

As a small business owner, setting up a retirement plan is not only a strategic move for securing your future but also a savvy way to reduce your tax burden. Two popular options that offer substantial tax benefits are SEP IRAs and 401(k)s.

SEP IRAs (Simplified Employee Pension IRAs): SEP IRAs are easy to set up and administer, making them ideal for small business owners and self-employed individuals. Contributions to SEP IRAs are tax-deductible, which means you can lower your taxable income for the year. For 2024, you can contribute up to 25% of your net earnings from self-employment, with a maximum contribution limit of $66,000. This significantly reduces your taxable income while allowing you to save more for retirement.

401(k) Plans: Offering a 401(k) plan can be more complex but highly beneficial, especially if you have employees. Contributions to a traditional 401(k) are made with pre-tax dollars, lowering your taxable income. In 2024, the contribution limit is $22,500, or $30,000 if you're over 50. Employer contributions are also tax-deductible, and offering a 401(k) can make your business more attractive to top talent, helping with recruitment and retention. Additionally, the IRS provides tax credits for small businesses that start a new 401(k) plan, further reducing costs.

Both SEP IRAs and 401(k)s provide a win-win scenario: you get to save for your retirement while enjoying immediate tax savings. By lowering your taxable income, these plans help you keep more of your earnings in the present while securing your financial future. For personalized advice and to maximize these benefits, consider consulting with a financial advisor or tax professional. Implementing these retirement plans is a smart strategy for growing your business while cutting taxes.

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