As we inch closer to tax season (where did the summer go!) I’m determined to elevate your tax savings beyond the deductions you can find in a google search so you are in the best possible spot at the end of this year. Queue the stuff you actually want – TAX SAVING STRATEGIES!
Advanced Tax Strategies for Mental Health Professionals:
While tax deductions play a pivotal role in reducing tax liabilities, they only reduce your tax bill when you spend money. When implemented correctly, specialized strategies utilizing the tax code can give you big savings:
1. The Augusta Rule: This permits homeowners to rent out their homes for up to 14 days annually without reporting the rental income. If you host workshops, board meetings, or group therapy sessions at home, this strategy might apply to you.
2. S-Corp Election: By transitioning from a sole proprietorship or LLC to an S-corporation, you can likely reduce your self-employment tax liabilities, which could save you tens of thousands of dollars per year in taxes. Pay yourself a “reasonable” salary and then take additional profits as distributions, which aren’t subject to self-employment taxes.
3. Tax Loss Harvesting: If you have a financial portfolio with stocks or other investments, you may be able to use previous years’ “losses” to offset your current year “gains.” In other words, you may be sitting on an opportunity to sell profitable stocks this year without paying taxes on the gains.
Remember: These strategies are intricate and may not be suitable for everyone. Always consult with a tax expert before making any decisions to ensure you’re adhering to tax codes and maximizing your savings legitimately.