As a small business owner in Northern Colorado, you probably don’t have the time to research all of the LLC tax breaks in Greeley. It’s hard enough to run a business without the stress of taxation and IRS standards. While we can’t simplify your company’s day to day operations, we might have a solution for your tax stress.
There are a ton of common (but, often overlooked!) tax breaks to help you save money as a small business, and we’re here to share a few. Before we get started, however, you’ll need to double check that your LLC is filed as an S Corporation, as that impacts eligibility.
Filing for S Corporation Tax Election
Depending on the number of owners, an LLC can be filed with single-member LLC taxes or multi-owner LLC taxes. And most of the time, small business owners don’t make any changes to that structure.
In order to obtain LLC tax breaks in Greeley, however, you can file an S Corporation tax election. This would simply be a request to tax your LLC differently.
While this may not be the perfect solution for every small business, it does offer serious tax benefits to select operations.
Below, we’ve outlined some of the benefits of filing an S Corp tax election.
S Corp Benefits & LLC Tax Breaks in Greeley
It’s a Tax Break For the Business Owner
When an LLC is taxed as an S Corp, the owner is categorized as an employee. As an employee, the owner can give himself/herself a reasonable salary, and keep the overflow profits as a distribution.
By receiving an S Corporation distribution, you avoid employment related taxes. A standard LLC set up, however, does carry with it self-employment taxes. (Think: SECA tax and FICA tax for Social Security and Medicare.)
You Can Avoid Double Taxation
If your LLC elects an S Corporation tax status, they will also avoid the double taxation of corporate income and shareholder dividends.
With all of these potential LLC tax breaks in Greeley, you can plan ahead for your small business finances and taxations with more freedom.
Here are a few of the most common LLC tax breaks in Greeley that will only be available if you file as an S Corp:
Business Meals Tax Deduction
Everyone has got to eat at some point, so why not reap ALL the benefits? Certain meal costs can actually be used as a tax deduction when tied to your business. This can include…
- Company-wide parties
- Personal meals that relate to doing business
- Office snacks & meals
- Business meals with clients
However, it’s important to note that this does not include the cost of entertaining clients. Mostly everything else is free game! This specific tax break is great because most costs are 100% deductible (as of 2022).
Office snacks and business meals are only 50% tax deductible, but still totally worth it. Throughout the year, make sure you’re purchasing from actual restaurants (not grocery stores or the like), and that you’re keeping detailed records of your spending.
Business Use of Your Car Tax Deduction
If driving is a part of your business, then you can also take advantage of this LLC tax break in Greeley.
In fact, people who are self-employed may receive a tax deduction for every mile driven (for business purposes). As long as they keep a detailed record of their driving history and purpose, they can receive up to 58.5 cents per mile.
This applies to a lot of scenarios, too! Whether you’re driving to a client or traveling for a meeting, you can qualify. Keep in mind: vehicles that are used as equipment (dump trucks, shuttles, taxies, etc.) do not count.
Home Office Tax Deduction
If you’re operating out of a home office, you may qualify for certain tax deductions to rival the rent, utilities, and other related expenses of an office space.
This LLC tax break in Greeley encompasses equipment such as chairs, desks, machinery, and more – as long as it’s a business expense! And the items don’t necessarily need to be new, as long as they’re new to the business.
Using the current value, you can still itemize these possessions as a tax break. The only stipulation, however, is that you keep all your receipts and records as proof.
Education Tax Deduction
As a small business owner, you might be interested in offering qualifying educational opportunities to yourself or your employers, and this LLC tax break rewards that decision!
Continued education & professional license acquisition are 100% deductable, as it pertains to your business. This can include certain subscriptions, seminars, classes, workshops, and more.
Requirements For LLC Tax Break In Greeley
In order to get an LLC tax break in Greeley, you will need to meet some specific requirements.
First, the owner of an S Corporation cannot be a corporation, partnership, or nonresident alien. Rather, the owners must be U.S. citizens, residents or certain trusts, estates, and tax-exempt corporations. (See full list of requirements.)
Second, as an LLC owner, you must apply for the S Corporation tax status within the first 75 days of your company’s existence. You can do this with IRS Form 2553. If you wish to elect S Corp status on an already existing LLC, you need to file at least 75 days prior to the beginning of the new year.
While the decision to use an S Corporation Tax Election may benefit your company, it’s a decision that should be made after extensive research and consultation.
Keep Meticulous Records
Although there are a ton of other tax breaks available to you if you file for S Corp tax election, you won’t get any of them without meticulous record-keeping. It’s essential that you keep track of these LLC tax breaks and record any deductible expenses.
Hiring a bookkeeper can be extremely helpful in helping you manage these tax breaks, but also in discovering all the others tax breaks available to you!
Yeater & Associates have been working with small businesses for years, and as Greeley’s best accounting, CPA, and consulting firm, we’re more than happy to discuss how the S Corporation Tax Election could benefit your LLC. Give us a call at (970) 378-4830 or schedule a consultation online.