Did you know there are still some things you can do to reduce your 2017 taxes? You’ve missed most tax savings opportunities since they tend to have to happen within the calendar year. However, there are a couple that you can still do… and even an extra two available to you as a business owner!
One really important note: I’m not a CPA and if you’re looking for specific tax advice you should talk to a CPA. I’ve sent folks to Ernest Jones before and he knows his Twitch… check him out. Additionally, you could check out our article on taxes here.
Traditional IRA + HSA
First, assuming your return shows under $72k Modified Adjusted Gross Income (MAGI) single ($119k married) you can get a tax deduction for contributing to a traditional IRA. There are two types of IRA, traditional and Roth. In this case you care about the traditional IRA where your money goes in pre-tax.
So how much can you save? Well, you can put $5.5k into a traditional IRA ($1k more if over 50) and the amount you get as a deduction depends on your income. If you’re below $62k MAGI single ($99k married) you can deduct the full amount of your contribution. Then there’s a phase out of the deduction up to that cap we listed before. A really rough rule of thumb is that a self-employed individual can reduce their taxes by roughly 30% of the amount they put into a traditional IRA, assuming they qualify. That’s some nice savings!
Similarly, you can put money into a Health Savings Account up until the tax deadline.
You can potentially get a tax credit, which reduces the tax you owe dollar for dollar and therefore is awesome, for saving into an IRA. Here’s a link to the IRS site with the formula for calculating the credit; I’m linking that since there’s a decent amount that goes in to it.
Basically, if you’re saving when you have a lower income you can get even more tax benefit.
Here’s where we get in to the potential savings for a small business owner… which would be you, the income earning streamer! One of the best ways to save yourself money on your 2017 taxes is to review your income statement for expenses that you missed.
Unless you’re extremely diligent and have been working with a bookkeeper (fun fact, only English word with 3 straight double letters) odds are you missed logging some of your expenses. Each additional expense you add in reduces your tax bill and since you already paid for it you might as well take the tax benefit.
So where are you most likely to miss expenses? I’d look at conferences, expenses for things like credit card payments, and miscellaneous equipment or software you might have purchased for the stream.
The second thing you can do as a streamer is open a SEP IRA. This is an account that’s only available to businesses and it’s designed to be easier to open and administer than the kinds of accounts you’d see at bigger businesses. One important feature of a SEP IRA is that the amount you can contribute depends on how much income you earned. Because of that, the IRS lets you make a SEP contribution up to when you pay your taxes for the previous year. The reason for that is you might not know what your total income is until that point meaning you don’t know what you could contribute to a SEP.
Now, it’s really important to state that there are several types of business retirement accounts. Each is unique and appropriate for different businesses based on size and life cycle. It may be that a SEP IRA, even though it presents this particular benefit, isn’t right for your business. You should talk with an expert about the right retirement account for your stream.
You usually have to make your tax moves before the end of the year. However, there are a couple of things you can do between the end of the year and actually having to file your taxes that can save you money. You can look at contributing to a retirement account (like a traditional IRA or a SEP) or double check your business expenses to make sure you’re maximizing your benefit.
You don’t have to figure this out alone. This is what we do- help streamers make great money decisions. If that’s something that sounds interesting to you reach out me or schedule some time for a free consult. You can check out what I do here.