16. Explore Retirement Tax Shelters for the Self-Employed
The number of individually owned businesses in the U.S. has grown dramatically over the past 20 years, and wealthy taxpayers earn the majority of income from such businesses, according to the Tax Foundation. Just as high-income taxpayers earning a paycheck look for ways to lower their taxable income, so do high-income small business owners.
Self-employed taxpayers can deduct contributions to IRAs, such as a SEP-IRA or solo 401k, which have higher contribution limits than traditional IRAs. With a SEP-IRA, you can contribute 20 percent of net income, up to a maximum of $54,000. A Solo 401k lets you contribute $18,000 plus 20 percent of business earnings, up to a maximum of $54,000, plus a catch-up contribution of $6,000 if you are over 50.
Learn: How to File Self-Employment Taxes