In anticipation of the election and in response to public demand, Hillary and Bill Clinton have released their 2015 federal tax return. Tax returns have been a hot topic this year, as candidate Donald Trump continues to refuse to release his tax returns.
What can you learn from reviewing the Clinton’s tax returns about how to set up your business to save money on your own taxes?
First and foremost, plan ahead and plan well, and this is the time of year to do it. If you have not already scheduled your year-end tax planning session with a CPA you love, contact us for a referral.
And if you are on one of our top-tier VIP membership programs, we’ll even attend the meeting with you.
So, what can you learn from the Clinton’s returns to save on your own taxes?
A few of the things they overlooked (or chose not to utilize due to potential public scrutiny or political backlash), that you can benefit from:
- Incorporate your business and have it taxed as an S-corporation, then pay yourself a small, but reasonable salary and take the rest of your income via profit distributions, saving big on self employment taxes.
Most self-employed business owners are missing this major tax saving opportunity, including the Clintons (which cost them over $348,000).
If you are not already incorporated and using the S-corporation tax election and paying yourself a small but reasonable salary, contact us to help you get set up.
- Maximize your retirement plan contributions each year, either to an IRA or self-employed 401k.
Not using a plan like this, likely cost the Clinton’s more than $40,000. But, it’s not too late for you to set up a retirement plan that will allow you to defer taxes on income you are saving for retirement, if you begin planning now.
Once the end of the year has come and passed, it will be too late for this year. So, contact us to support you to get set up with the right kind of retirement plan for you and your business.
- Consider how you handle charitable contributions.
In 1998, the New York Times ran an article that showed how the Clintons could have structured book royalties from “It Takes a Village” slightly differently (sending the royalties directly to charity, rather than to Hillary Clinton first, limiting the total deduction to just half her income, would have netted the charities an additional $32,000 that went to the government instead).
If you have written a book or created another service or product with the proceeds going to charity, ensure that the income flows directly to the charity, and not to you. We can help you with this as well.
It’s always best to consult with an experienced legal and tax advisor to maximize the tax savings for your business.
As a Family & Business Lawyer we can help you learn about the various options available so you can maximize the beneficial tax treatment of your business under federal and state law.
This article is a service of Gratia P. Schoemakers, Family & Business Lawyer. We offer a complete spectrum of legal services for businesses and can help you structure your operations for success.