Minimize Your Tax Liability with Expert Tips

Tax season is approaching fast, and at Family Business Funding, we know how vital it is for small businesses to stay ahead with smart tax-saving strategies. To support you, we’ve updated our guide with effective tips, including leveraging Revenue-Based Financing (RBF) and exploring underused tax deductions.

1. Leverage Revenue-Based Financing (RBF)

Did you know that RBF offers significant tax advantages?

• Not Taxable as Income: Since RBF is an advance and not a loan, the funds you receive aren’t considered taxable income.
• Deductible Fees: Associated fees with RBF can often be classified as deductible business expenses.
• Pro Tip: Consult with your accountant to accurately allocate these expenses and maximize savings.

2. Optimize Interest Expense Deductions

If you’ve opted for debt financing, take advantage of interest expense deductions.

• Extra Payments Strategy: Making additional payments before the year-end can help you claim more interest deductions for this tax year.
• Example: An extra $5,000 payment with $1,000 in interest can reduce your taxable income significantly.

3. Maximize Section 179 Deductions

Invest in your business and reap the rewards.

• Invest in business equipment or software—up to $1,080,000 can be fully deducted in 2025 under Section 179.
• RBF Funding: Use these funds for purchases to take full advantage of this deduction.

4. Benefit from Tax Breaks on Revenue Based Financing (RBF)

• Payments on MCAs may qualify as operating expenses. Ensure detailed documentation to categorize these correctly for tax purposes.
• Some MCA providers offer specific guidance—contact your provider for clarity on deductible fees.

5.?Reinvest Tax Savings for Business Growth

• Reinvesting saved taxes into growth initiatives, like marketing or technology upgrades, can generate higher returns.
• Example: A $2,000 reinvestment in targeted marketing could yield a $10,000 boost in revenue.

6. Research Tax Incentives and Credits

• Explore state and federal tax credits for hiring, sustainability initiatives, or R&D activities.
• Programs like the Work Opportunity Tax Credit (WOTC) can offset labor costs for eligible employees.

Why Professional Guidance Matters

Each business is unique, so consulting with a tax professional is critical! They can uncover overlooked deductions and ensure compliance with IRS regulations.

Tayne, Leslie H. “Can You Write off a Merchant Cash Advance on Taxes?” Can You Write Off a Merchant

Cash Advance on Taxes?, Tayne Law Group, P.C., 8 Mar. 2023, attorney-newyork.com/2023/03/08/writeoff-merchant-cash-advancetaxes/#:~: text=MCAs%20are%20not%20subject%20to%20income%20tax%20and%20generally%20cannot,to%20offset%20any%20tax%20liabilities.

Jacovetti, Robert. “Robert Jacovetti.” Tax Implications of Merchant Cash Advances, jacovettilaw, 1 Apr. 2018, www.jacovettilaw.com/blog/2018/april/tax-implications-of-merchant-cash-advances/.

?United States. Department. of the Treasury. Internal Revenue Services. (Jan 11, 2023). Publication 334:Tax Guide for Small Business (Cat. No. 11063P). Retrieved from https://www.irs.gov/pub/irs-pdf/p334.pdf

United States. Department. of the Treasury. Internal Revenue Services. (Feb 2, 2023). Publication 535: Business Expenses (Cat. No. 15065Z). https://www.irs.gov/pub/irs-pdf/p535.pdf