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Boosting Profits and Savings: 5 Tax Strategies for Business Owners

Updated: Jan 10

For business owners, striking a balance between operating costs and profit is the cornerstone of success.



Operating costs include everyday expenses like salaries, rent and supplies. Profit, on the other hand, is what remains after all these operating costs have been paid. It's the reward for the risks taken and the value created by your business. Often, savvy business owners will look to tax strategies to help find the sweet spot, where operating costs are managed efficiently while maximizing profit.


By utilizing tax-friendly strategies, owners can reduce their tax liability, effectively boosting profits without increasing sales or cutting costs. Let's delve into some of these strategies and explore how they could potentially bolster your business's financial health, reduce taxes and help you save for retirement.


5 Tax Strategies to Consider


1. Max Out 401(k) Contributions


Maximizing contributions to your 401(k) account on a Pre-tax basis reduces taxable income. If you are not maxing out your 401(k) plan each year, you're missing out on a significant tax advantage. For 2024, the employee contribution limit is $23,000. Individuals aged 50 or above can contribute an additional $7,500, making their total tax-deferral limit $30,500.[1]


2. Profit Sharing Contributions


A profit sharing plan allows employers to make contributions to retirement savings accounts based on the company's profits. This incentivizes employees and provides tax benefits for the business.


3. Cash Balance Plan


These are types of defined benefit retirement plans. They offer an advantage to business owners by allowing them to contribute substantially larger annual amounts in comparison to other retirement plans, such as 401(k)s.


4. Health Savings Account (HSA)


An HSA is a tax-advantaged medical savings account for individuals enrolled in a high-deductible health plan (HDHP). Contributions to an HSA reduce taxable income. The funds grow tax-free and withdrawals for qualified medical expenses are tax-free. For 2024, the contribution limits are $4,150 for individual coverage and $8,300 for family coverage. At age 55, individuals can contribute an additional $1,000.[2]


5. Hiring Family Members


While this may sound odd, hiring family members can be an effective tax strategy for business owners. By employing family members, you can transfer income from a higher to a lower tax bracket, potentially reducing your overall tax liability. The wages paid for legitimate work are deductible business expenses.


Every business is unique, with its own specific challenges, opportunities and goals. That's why we're here to help you explore these potential strategies, understand their implications and implement the ones that are right for you.



The Gasaway Team


7110 Stadium Drive

Kalamazoo, MI 49009

(269) 324-0080

FAX (269) 324-3834



This presentation is not an offer or a solicitation to buy or sell securities. The material discussed is meant to provide general education information only and it is not to be construed as specific investment, tax or legal advice and does not give investment recommendations.


Certain risks exist with any type of investment and should be considered carefully before making any investment decisions. Keep in mind that current and historical facts may not be indicative of future results.


Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website, https://adviserinfo.sec.gov/firm/summary/123807.


This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.


©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.

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