5 Tax Planning Tips for Women Entrepreneurs

5 Tax Planning Tips for Women Entrepreneurs

November 08, 2022
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When you are busy running a company, it may be difficult to think about your taxes. Proactive tax planning helps you to avoid an unexpected tax liability when you file. These helpful strategies may offset your tax liability and might improve your future finances.

1. Make Sure You Are Saving for Retirement

Entrepreneurs tend to pour all of their money into their businesses. While this strategy might be essential during the company's early growth, you must also diversify with traditional retirement investments later. This strategy may be especially important for women. Women are less likely to have retirement savings than their male counterparts.1

2. Think About Child Care Credits

If you pay for someone to watch your child while you run your business, you may be eligible for the child care credit. To claim the valuable credit, you must have tax paperwork from the daycare provider. If you are paying a neighbor or relative under the table, you may not be able to claim the credit. Consider your situation's financial pros and cons when making child care arrangements.2

3. Pay Off College Loans

When you pay off college loans, you get a personal tax credit for the interest on the loans. However, you may be able to maximize your deduction by running the payments through your business. Your business needs to be taxed as a corporation to qualify for a business deduction.

A corporation is allowed to pay up to $5,250 for student loans and claim the payment as a business deduction. You, in turn, do not have to report the payment as personal income.

If your business is a sole proprietorship, you do not get this tax benefit for yourself, but you may want to offer this perk to your employees. Again, the business gets the deduction, but the employee does not have to report the payment as income.3

4. Invest in Long-Term Care Insurance

As an entrepreneur, you get to write off the cost of your health and long-term care insurance as a business expense. This rule applies whether you do a bit of freelance work or run a company with multiple employees. For now, the long-term care premiums help to reduce your tax bill, but they also protect the wealth of the business you are building.

Without long-term care coverage, people have to pay these expenses, which may be exorbitant. Alternatively, they have to eliminate all of their assets to qualify for Medicaid coverage of long-term care. A long-term care policy may help you avoid these alternatives. This strategy may be important for women because they are more likely to need long-term care — 58% of women need long-term care as they age.4

5. Shape a Women-Friendly Benefits Package

As a women entrepreneur, you may want to build your community and help fellow women. To this end, your business could offer women-friendly benefits.

For example, you may want to offer daycare to employees. In addition to shoring up your retirement account, you may want to consider offering retirement accounts to your employees. This expense provides you with a business deduction. At the same time, it provides your employees with a valuable benefit that helps to attract talent and may boost key employee retention rates.

Contact me for further insight and assistance.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any Long Term Care product or individual security. To determine which product(s) or investment(s) may be appropriate for you, consult your financial professional prior to purchasing or investing.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking # 1-05325540

Footnotes

1Those Who Married Once More Likely Than Others to Have Retirement Savings, The U.S. Census Bureau.

2Topic No. 602 Child and Dependent Care Credit, Internal Revenue Service.

3Up to $5,250 of Employer Student Loan Assistance Is Tax-Free Through 2025, The College Investor.

4Must-Know Statistics About Long-Term Care: 2019 Edition, Morningstar.