Imagine looking back a few years from now and realizing there were ways to reduce what you paid in taxes.
Your income may look good on paper, but it doesn’t always reflect how much you actually keep.
Taxes don’t exist on their own. They’re tied to how you pay yourself, how your business is structured, how you save, and how decisions are made throughout the year.
When those pieces aren’t coordinated, opportunities can be missed.
Here are five areas where a more connected approach can help you keep more of what you earn.
1. Review Your Retirement Plan as Your Business Grows
Many business owners set up a retirement plan early on and don’t revisit it for years.
It usually starts with something simple. An IRA gets put in place, contributions are made, and it checks the box.
Over time, the structure can start to create limitations.
Contribution rules may reduce flexibility, especially once employees are involved. In some cases, putting money away for yourself means contributing to employees at the same percentage.
As income increases and the business becomes more established, it makes sense to take another look.
There may be options that allow for higher contributions, more flexibility, and better alignment with where the business is today. A 401(k) with a profit-sharing component is one option that allows for higher contributions and more flexibility.
Retirement planning for business owners looks different, especially without a pension.
2. Coordinate Retirement Contributions as a Household
When one spouse runs a business and the other earns a salary, financial decisions tend to happen separately.
Looking at everything together can open opportunities.
If one spouse has access to a strong employer retirement plan, maximizing that account can reduce overall taxable income. Funds can still come from shared household resources.
Planning as a unit can lead to:
- Better use of available tax advantages
- Stronger long-term savings
- More clarity around how money is being allocated
3. Use Real Estate Decisions to Manage Taxes
At our firm, we work alongside a lot of business owners who own investment properties in addition to running their business.
Over time, those properties can become a meaningful part of their overall financial picture. They generate income, build equity, and in some cases, create tax advantages depending on how they’re structured.
One example of where this comes into play is when an investment property is sold. In most cases, taxes are owed on the gain, including capital gains and depreciation recapture, which can take a significant portion off the table.
Under certain conditions, that tax can be deferred by reinvesting into another investment property through what’s known as a 1031 exchange. Sometimes referred to as a “like kind exchange”, you exchange one property for a similar investment property. These exchanges follow strict timing and structuring rules, so they need to be set up properly in advance.
Instead of paying taxes at the time of sale, the proceeds are rolled into a new property, allowing more capital to remain invested.
For business owners already using real estate as part of their strategy, this can create more flexibility when deciding whether to hold, sell, or reposition those assets.
Like everything else, it works best when it’s coordinated with the rest of your overall plan.
4. Use a 529 Plan Even if College Has Already Started
Many families assume a 529 plan * only helps when children are young.
In reality, it can still be useful during the college years, even if tuition is already being paid out of pocket.
In certain states, including New York, contributions may qualify for a state tax deduction even if the funds are used for tuition in the same year, depending on how the plan is structured.
For business owners already covering tuition costs, this can create a tax benefit on money that was already going to be spent.
It’s a simple adjustment that doesn’t always get considered.
5. Revisit Your Business Structure as Income Grows
Your business structure affects how your income is taxed and how you take money out.
Early on, an LLC is usually enough. It’s simple and works well when income is lower.
As income becomes more consistent and the business evolves, it’s worth taking another look at whether your current setup is still the most tax efficient.
In some cases, changes may reduce self-employment taxes depending on how income is paid and documented, while also creating more flexibility around retirement planning.
Any changes here should be reviewed carefully and in the context of your overall plan.
6. Move Beyond Filing and Start Planning Ahead
Having an accountant who prepares accurate returns is important.
But preparing a return and planning ahead are two different things.
A forward-looking approach considers how decisions made during the year affect what you pay in the future. It looks at timing, coordination, and how different strategies interact.
Areas to review may include:
- Timing of income and deductions
- Retirement contributions
- Alignment between business and personal finances
Looking at these pieces in advance gives you more control over the outcome.
Looking at Your Overall Financial Plan
Each of these strategies can stand on its own. But when they work together, they are much more effective.
Tax decisions affect cash flow. Cash flow affects what you can save. Savings affect your options later.
Planning ahead, across your full financial picture and not just at tax time, gives you more control over what you keep.
If any of these areas haven’t gotten a close look recently, it’s worth a conversation with one of our wealth advisors.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.
LPL Financial does not provide legal advice or services, or tax advice or services.
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC. CPC Wealth Management is not an affiliate company of LPL Financial.
*Prior to investing in a 529 Plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid,
