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Tax Saving Tips for Self-Employed Retirement Planning

As a business owner or freelancer, you already know that it’s important to be proactive about tracking your income and keeping detailed financial records. And when it comes to planning for your future plans, including retirement, you want to make the most of each dollar you earn today.

When you’re self-employed, it’s important to consider how year-to-year expenses, including your taxes, can impact your future financial planning activities. If you’re evaluating your mid-year finances and looking for ways to make the most of your retirement strategy, consider some of the following tax saving tips have the potential to impact your retirement plans.

Look into Potential Deductions

As a self-employed taxpayer, you may qualify for certain deductions that allow you to set funds aside for retirement planning tax-free. The 199A tax deduction is one example, which allows you to deduct up to 20-percent of Qualified Business Income (QBI) from a business operated as a sole proprietorship, partnership, S-Corp, or LLC.

Your financial professional is the best person to consult when considering which deductions are right for your situation, based on your business structure, income, and other investments. However, as a business owner, you may qualify for certain deductions that’ll positively impact your bottom line and provide a way to add a little extra to your retirement investments.

Evaluate Your Investments

Speaking of investments, there’s never a bad time to look over your portfolio and review how your nest egg is working for you. Depending on your specific investment mix and your earnings, you’ll have certain tax obligations to report, but you may also get certain benefits due to your self-employed status.

Real estate investments, in particular, can offer some tax savings if you are the manager of your own properties. If you are invested in real estate, your tax professional can provide direction in understanding how to claim these properties and take advantage of business expenses related to their upkeep and management.

More traditional investments, like your stock portfolio, require periodic check ups, too. Remember, the money you earn from these investments is subject to a tax category of its own and you want to ensure that you’re prepared to shoulder this tax burden when you file. If you anticipate that your capital gains for the calendar year will be quite high, look into ways to reallocate the funds or remove certain investments to better meet your target numbers.

Solidify (or Review) Your Retirement Plans

Perhaps you’ve got a retirement plan figured out and you’re humming along with making progress toward your long-term financial goals. Or maybe you haven’t yet started down the path of retirement planning.

Whichever situation applies to you, it’s important to review your retirement options, since your self-employed status can impact the investment vehicles you have available to you. There are a variety of retirement accounts, including IRAs, available to small business owners and your financial advisor can provide guidance on choosing retirement options that make sense for your future goals, while taking your self-employment into account.

In fact, your financial advisor is an invaluable partner in working through your self-employment retirement planning process. They can help you narrow your focus and look at investments that work for your current budget as well as your future plans. They can also help you to determine how today’s actions can impact your tax strategy – and connect the dots to see how that could positively or negatively impact your long-term retirement planning.

To learn more about your self-employed retirement planning options, contact Jacob Sturgill today for an initial consultation!

    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.

    Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.