How to Avoid a Hefty Tax Bill – BusinessWeek
Take credits for research and development: Are you spending money doing research to discover new business components or gain tech knowledge? You can take 20% of your excess expenses as a credit, says Jackson. “The trick is that you have to be able to document the research and show accumulated costs,” he says.
If you’re exporting or thinking about it: You can set up a separate company as your sales agent and assign 50% of your profits to it as deemed commission. “If you’re qualified for foreign sales and you do this, your original business gets a deduction for half of its profits,” Jackson says. Your sales agent firm can then pay that profit out to you personally as a dividend, saving you up to 20% on your income tax liability.
There are some tax avoidance tactics like these that amaze me. Reducing taxes by up to 20% simply by creating a separate company to sell internationally? I need to make sure that we’re up to speed on all these tactics.
