In an era of increasingly fierce competition, companies are always examining ways to cut operational costs and enhance profitability without running afoul of the law. And one of the best ways to do that is by being smart with your money – especially with smart tax planning. Here, experienced TX tax strategists in Texas business owners trust come in. Through educating business owners about the state and federal tax systems, these practitioners carry out their role of ensuring businesses claim all applicable deductions, credits and exemptions and comply with all tax laws.
Texas is widely regarded as a business-friendly state when it comes to taxes — and for good reason. The state does not levy a personal income tax and does not impose a corporate income tax. Texas instead levies a franchise tax on most businesses based on its revenue. Though the tax rate isn’t high (0.375% for retail and wholesale businesses, 0.75% for all others), misclassification, reporting mistakes or overlooked exemptions can result in significant fines. This is where a comprehensive tax strategy, ad vised by professionals is necessary.
Tax planning for a business starts much before they prepare an annual return. Strategic advisers, who work with businesses year-round to estimate revenue, forecast tax liabilities and find legal ways to reduce taxable income. For instance, tax implications for investment in capital, employee perks and support, or charitable donations can differ from one timing or configuration to the next. Tax strategists with whom Texas companies consult frequently advise them to tailor spending decisions around plans for their fiscal year,” in order to maximize deductions and offset gains.
Depreciation and Capital Asset Management One important area in which Texas businesses can strategically benefit from planning is that of depreciation planning and capital assets. Under the IRS tax code through Section 179 and bonus depreciation rules, businesses are able to write-off the entire cost or a portion of certain equipment or property in the year in which they acquire the equipment. In 2024, companies may deduct up to $1.22 million under Section 179, as long as their total equipment purchases do not exceed $3.05 million. Awareness of what assets do and do not qualify, when to make the purchases and alignment with state tax filing can all be complex, but it can lead to big savings down the road.
One of the most consistently forgotten deductions is the Research and Development (R&D) Tax Credit. A lot of Texas smaller companies may not realize that they qualify for this federal credit that promotes innovation and process improvement. For everything from R&D of new products to even making improvements to internal software systems, these actions can yield significant tax credits when properly documented. Strategic advisors help businesses gather data up the chain of technology and finances and in working through how the data fits in with what the IRS wants in order to minimize audit risks.
Businesses must also deal with quarterly estimated taxes, payroll and sales taxes in the middle of the fiscal year. Texas has a state sales and use tax of 6.25%, and local jurisdictions can add up to 2% more. Any deductions, failure to collect, report or remit these taxes can result in heavy penalties. In industries such as retail, hospitality and online commerce, tax strategists work to ensure that systems are in place to effectively track and file taxes. Mid-year reviews by Texas tax strategists trusted by business owners will spot issues early on and stave off surprises when the year draws to a close.
Compliance is another place that strategic tax planning can provide great value. Given that laws are frequently changing — most notably in regards to worker classification, digital goods and e-commerce — both IRS and Texas Comptroller of Public Accounts compliance is crucial. Failing to classify people as employees when they are employees — a misclassification such as improperly treating workers as independent contractors — could result in back taxes, fines and lawsuits. Tax strategists advise organizations how best to navigate new legislation and how to adjust their policies to mitigate non-compliance.
And for companies looking to grow—whether in Texas or out-of-state—multistate tax planning is critical. Businesses based in Texas doing business in another state are also subject to nexus, or a significant business presence, and could be obligated to file income tax or sales tax returns for more than one state. Tax pros assist in coordinating the identification of revenue sources and location of business activity and workforce to reflect obligations in separate countries and optimize the tax footprint between the jurisdictions.
Exit and succession planning are also essential embeds of long-term tax strategy. Whether the owner wishes to sell the company, gift it to another family member or merge with another company, the tax impact can be significant. Capital gains, estate, and entity reorganization are all factors that come into play, and must be planned for well in advance. Advisers assist in planning the most tax-efficient pathways — which are often trust planning, gift of assets or corporate reorganization.
Ultimately, for business owners who are working to create fiscal stability and a strong, compliant company, year-round, context-based tax planning is extremely important. By partnering with seasoned tax planners Texas companies rely upon to minimizes their state taxes, maximizing any and all deductions, credits, or exemptions as they identify and comply with shifting state tax codes. In a state with one of the most pro-business tax climates, particularly for a Texas business, it’s not just about getting it in on time—companies that put a premium on strategic tax planning can maximize savings and plan ahead for their success.