Did you know that most small business owners overpay their taxes every year? This overpayment can have damaging effects on your company, especially if you have razor-thin margins or are new to the market. Therefore, these are a few tips to help you reduce your tax burden every year.

Invest In Your Retirement

If you have had a business for more than a year, you understand that when you work for yourself, you must pay self-employment taxes unless you draw a salary from your company and pay your Social Security and other taxes through your paycheck. When you get your tax bill, the amount you owe may surprise you. However, you can reduce your taxable income through your investments.

Just like those who work for someone else can take their retirement contributions off on their taxes, so can those who own their businesses. You can invest $5,500 or $6,500 in your retirement account if you are under or over 50, respectively, if you invest in an IRA. A traditional IRA delays your tax until you start taking money out of it after you retire. A Roth IRA is a post-tax contribution, so it does not reduce your taxable income.

Maximize Your Deductions

Did you know that if you have a home office or use your vehicle for work, you can take part of your expenses off on your taxes? For example, the percentage of your home that comprises your business is the same percentage of utilities, mortgage interest, repairs, and insurance you can deduct. There are percentage limits, so consult a tax professional.

If you purchase business equipment, including computers, telephones, or manufacturing machinery, you can deduct these expenses in the same year you purchase them if their total cost is less than $500,000. If you expect to earn more in future years, you can also depreciate these assets over time, reducing your burden for several years rather than one.

You can also deduct your mileage or vehicle expenses, including repairs, insurance, and gas. You should calculate both options to determine which will provide a higher deduction.

Keep Track of All Your Receipts

Everything you purchase that you can use for your business is tax deductible. However, you often need receipts to prove your expenditures. Therefore, you need to find a way to save and organize your receipts. Several software suites or apps are available that can copy and organize these documents digitally, so you don’t have to keep piles of paper receipts.

These are just a few ways you can save money on your taxes. Don’t hesitate to research other ways small businesses can reduce their tax burden.