Unlock Smart Savings: Your Friendly Guide to US Business Tax Strategies

Running a business in the US is an exciting journey filled with innovation, growth, and, yes, taxes! Navigating the complex world of US business taxes can feel overwhelming, but it doesn’t have to be a source of stress. In fact, with the right knowledge and strategic planning, your business can significantly reduce its tax burden and keep more of its hard-earned profits. This comprehensive guide from Netfintax is designed to be your friendly companion, empowering you with practical insights and actionable strategies to unlock smart savings. We’ll explore everything from understanding your business structure’s tax implications to leveraging deductions and planning for the long term. Get ready to transform your approach to US business tax and make tax season a little less daunting!

1. Setting the Stage: Understanding Your Business Tax Landscape

Before we dive into the exciting world of tax-saving strategies, it’s absolutely crucial to lay a solid foundation. Understanding the basics of how your business is taxed in the US empowers you to make informed decisions, avoid costly mistakes, and truly maximize your savings. Think of this as your essential US business tax basics primer, designed to demystify your federal and state obligations.

1.1 Knowing Your Business Type and Its Tax Implications

Your legal business structure isn’t just a formality; it’s a fundamental decision that dictates how your profits are taxed, who is liable, and what forms you’ll file. Let’s break down the common structures and their tax implications for small business tax guide purposes:

• Sole Proprietorship: This is the simplest structure, where you and your business are one and the same. Profits and losses are reported on your personal tax return (Schedule C, Form 1040). You’re also responsible for self-employment taxes (Social Security and Medicare).
• Partnership: Similar to a sole proprietorship, but with two or more owners. The partnership itself doesn’t pay income tax; instead, it files an informational return (Form 1065) and each partner reports their share of profits/losses on their individual tax return (Schedule K-1). Partners also pay self-employment taxes.
• Limited Liability Company (LLC): An LLC offers liability protection, separating your personal assets from business debts. For tax purposes, an LLC is flexible. It can be taxed as a sole proprietorship (single-member LLC), a partnership (multi-member LLC), or you can elect to have it taxed as a corporation (S-Corp or C-Corp). This flexibility makes LLCs very popular.
• S Corporation (S-Corp): An S-Corp is a special IRS tax election for certain corporations or LLCs. It avoids the “double taxation” of a C-Corp (explained below) because profits and losses are passed through directly to the owners’ personal income without being subject to corporate tax rates. Owners who work for the business must pay themselves a “reasonable salary,” which is subject to payroll taxes. Remaining profits can be distributed as dividends, often exempt from self-employment taxes – a significant potential saving!
• C Corporation (C-Corp): A C-Corp is a separate legal entity that pays its own income tax at the corporate level. If profits are then distributed to shareholders as dividends, those dividends are taxed again at the individual shareholder level (known as “double taxation”). Despite this, C-Corps offer robust liability protection, can retain earnings for growth without immediate personal tax implications, and may be attractive for businesses seeking outside investment.

Choosing the right structure is a critical first step in your tax compliance journey. Your decision here impacts everything from how much you pay in federal income tax and state income tax to your ongoing tax obligations.

1.2 The Importance of Accurate Bookkeeping and Record-Keeping

Imagine trying to build a house without a blueprint or track a journey without a map. That’s what running a business without accurate bookkeeping feels like, especially when it comes to taxes! Meticulous financial records aren’t just good practice; they are the bedrock of effective tax planning and absolutely essential for substantiating every deduction you claim and surviving an audit unscathed. Poor records are a common reason for penalties during an IRS audit.

What should you track? Everything!

• All income (sales, service fees, interest, etc.)
• All expenses (utilities, rent, supplies, payroll, travel, meals, etc.)
• Asset purchases and sales
• Payroll records
• Bank statements and credit card statements
• Invoices and receipts for all transactions
• Mileage logs for business travel

Using accounting software (like QuickBooks, Xero, or FreshBooks) can automate much of this, making it easier to categorize transactions and generate reports. This isn’t just about meeting your tax obligations; it’s about having a clear picture of your business’s financial health and being prepared for anything.

1.3 Key Tax Deadlines and Estimated Tax Payments

One of the quickest ways to erode your hard-earned savings is by missing tax deadlines, which inevitably leads to penalties and interest. Understanding when to file and when to make estimated tax payments is critical for all US businesses, regardless of size or structure.

• Annual Income Tax Returns:
  • Most individuals and sole proprietors (Form 1040, Schedule C) file by April 15th.
  • Partnerships (Form 1065) and S-Corps (Form 1120-S) typically file by March 15th.
  • C-Corps (Form 1120) usually file by April 15th (for calendar year-ends).

  These dates can shift if they fall on a weekend or holiday, and extensions are often available, but you typically still need to pay any estimated tax by the original deadline.

• Estimated Tax Payments: If your business expects to owe at least $1,000 in tax (for individuals/sole proprietors) or $500 (for corporations), you generally need to make estimated tax payments throughout the year. These are typically due quarterly: April 15, June 15, September 15, and January 15 of the following year. Failing to pay enough tax through withholding or estimated payments can result in penalties, even if you get a refund when you file your annual return.
• Payroll Taxes: If you have employees, you’ll have ongoing payroll tax filing and payment responsibilities, often monthly or semi-weekly, depending on your tax liability.

Stay organized, use a calendar, and consider setting up automatic payments where possible. This proactive approach ensures you meet your federal income tax and state income tax responsibilities without unnecessary stress or penalties.

2. Maximizing Deductions: Don’t Leave Money on the Table

Now for one of the most exciting parts of tax planning: deductions! Deductions are your best friend when it comes to lowering your taxable income, effectively reducing the amount of profit the government considers for taxation. Every dollar you legitimately deduct is a dollar closer to keeping more money in your business. Let’s uncover the most common (and often overlooked) business tax deductions you can claim.

2.1 Common Business Deductions You Might Be Missing

The IRS allows businesses to deduct ordinary and necessary expenses incurred in carrying out a trade or business. “Ordinary” means common and accepted in your industry, and “necessary” means helpful and appropriate for your business. Here’s a comprehensive list of potential small business write-offs:

• Home Office Expenses: If you use a portion of your home exclusively and regularly for business, you can deduct a percentage of rent/mortgage interest, utilities, insurance, repairs, and even depreciation. There’s also a simplified option ($5 per square foot, up to 300 square feet).
• Business Meals: You can typically deduct 50% of the cost of business meals if they are ordinary and necessary, not lavish, and you (or an employee) are present. Keep detailed records!
• Travel Expenses: Business travel, including airfare, lodging, and transportation while away from home on business, is deductible.
• Vehicle Expenses: You can deduct actual expenses (gas, oil, repairs, insurance, depreciation) or use the standard mileage rate set by the IRS. Proper mileage logs are essential.
• Professional Development & Education: Courses, seminars, and trade publications that enhance skills directly related to your business are often deductible.
• Advertising & Marketing: Website development, social media ads, print ads, promotional materials, and public relations costs are 100% deductible.
• Insurance Premiums: Business liability, property, and even health insurance premiums for self-employed individuals can be deductible.
• Interest Expenses: Interest paid on business loans, credit cards, or lines of credit is deductible.
• Legal & Professional Fees: Payments to attorneys, accountants, and consultants are usually deductible.
• Rent & Utilities: Payments for office space, equipment rental, internet, phone, and electricity are all common deductible expenses.
• Supplies & Materials: Office supplies, inventory, and materials used in your products or services.
• Employee Wages & Benefits: Salaries, wages, bonuses, and contributions to employee benefit plans are significant deductions.

Remember, the key to claiming these is maintaining impeccable records and receipts for every tax-deductible purchase.

2.2 Understanding the Qualified Business Income (QBI) Deduction

The Qualified Business Income (QBI) deduction, also known as the Section 199A deduction, is a significant tax break introduced by the Tax Cuts and Jobs Act of 2017. It allows eligible self-employed individuals and owners of pass-through entities (sole proprietorships, partnerships, S-Corps, and some LLCs) to deduct up to 20% of their qualified business income.

This deduction is complex and comes with income limitations and restrictions for certain “specified service trades or businesses” (SSTBs) like health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, and brokering. However, for many small businesses, it can provide substantial savings by effectively lowering your taxable income by a fifth. Even if you’re in an SSTB, the deduction might still be available below certain income thresholds. Given its complexity and potential impact, understanding the QBI deduction details or consulting with a tax professional is highly recommended.

2.3 Depreciation and Amortization: Spreading Out Costs

When your business purchases a significant asset—like a new computer system, machinery, a vehicle, or even a building—you don’t usually deduct the entire cost in the year of purchase. Instead, the IRS generally requires you to spread out the cost over the asset’s useful life. This process is called depreciation for tangible assets and amortization for intangible assets.

• Depreciation: This allows you to recover the cost of tangible property (like equipment, furniture, vehicles, and real estate) over time. Each year, you deduct a portion of the asset’s cost, reducing your annual taxable income. The IRS provides specific methods and recovery periods for different types of assets. For instance, a computer might be depreciated over 5 years, while a building could be over 39 years.
• Section 179 Deduction and Bonus Depreciation: These are powerful incentives that allow businesses to deduct the full cost of certain qualifying new or used tangible personal property (like machinery or equipment) in the year it’s placed in service, rather than depreciating it over many years. This can significantly reduce your current year’s tax bill.
• Amortization: Similar to depreciation, but applied to intangible assets like patents, copyrights, software, customer lists, or goodwill. The cost of these assets is typically spread out and deducted over 15 years.

Properly calculating and applying depreciation and amortization can make a big difference in your tax liability, effectively reducing your annual taxable income by reflecting the wear and tear or obsolescence of your business assets.

3. Strategic Business Structure: Choosing Wisely for Tax Benefits

Your choice of business entity isn’t just about legal protection; it’s a profound tax decision that can significantly impact your bottom line. What might have been the best structure when you started could become less tax-efficient as your business grows or changes. Let’s explore how different structures can offer distinct tax advantages, a key component of your long-term corporate tax strategies.

3.1 LLC vs. S-Corp: A Deep Dive into Pass-Through Entities

For many small to medium-sized businesses, the choice often comes down to an LLC or an S-Corp, both of which are “pass-through entities” – meaning profits and losses are passed through to the owners’ personal tax returns, avoiding corporate-level taxation. However, their treatment for self-employment taxes (Social Security and Medicare) differs significantly, impacting potential LLC tax benefits and S-Corp tax savings.

• LLC (Taxed as Sole Proprietor/Partnership): If your LLC doesn’t elect to be taxed as an S-Corp or C-Corp, all of its net earnings are subject to self-employment taxes (currently 15.3% on earnings up to a certain cap, then 2.9% for Medicare on all earnings). While you can deduct one-half of your self-employment taxes, the full amount of your business profit is subject to it.
• S-Corp (Tax Election for LLCs or Corporations): This is where the potential for self-employment tax savings comes in. As an S-Corp owner who actively works in the business, you must pay yourself a “reasonable salary.” This salary is subject to payroll taxes (which include Social Security and Medicare). However, any remaining profits distributed to you as an owner distribution are generally not subject to self-employment taxes. This can lead to substantial savings, especially for highly profitable businesses.

Example: An LLC owner earns $100,000 profit. The entire $100,000 is subject to self-employment tax. An S-Corp owner also earns $100,000 profit, but pays themselves a $60,000 reasonable salary and takes $40,000 as a distribution. Only the $60,000 salary is subject to self-employment tax, while the $40,000 distribution is not.

The trade-off is that S-Corps have more administrative requirements (payroll, separate bank accounts, annual shareholder meetings, etc.). Deciding between the two requires careful consideration of your income level, administrative capacity, and the specific business entity choice that aligns with your goals.

3.2 When a C-Corp Makes Sense for Tax Planning

C-Corporations often get a bad rap due to “double taxation,” but they can offer unique advantages for certain businesses. While profits are taxed at the corporate level and again when distributed to shareholders as dividends, C-Corps possess several compelling features that make them a strategic choice in specific scenarios, particularly for those looking into more advanced corporate tax strategies.

• Lower Corporate Tax Rate: The Tax Cuts and Jobs Act of 2017 significantly lowered the federal corporate tax rate to a flat 21%. For businesses with very high profits that they intend to reinvest back into the company rather than distribute, this flat rate can sometimes be more favorable than individual income tax rates.
• Retained Earnings: C-Corps can retain earnings for future growth, expansion, or investment without immediate personal tax implications for the owners. This can be beneficial for rapidly growing companies.
• Robust Deductions for Employee Benefits: C-Corps can deduct 100% of health insurance premiums and other fringe benefits for owner-employees, offering more flexibility and potentially greater tax savings compared to pass-through entities where owner-employees often have different rules.
• Attracting Investors: C-Corps are the preferred structure for venture capitalists and other institutional investors because they offer flexible ownership structures, ease of stock transfer, and familiar legal frameworks.
• Qualified Small Business Stock (QSBS) Exclusion: For qualifying C-Corp stock held for over five years, gains of up to $10 million (or 10x basis) upon sale may be excluded from federal income tax. This can be a massive benefit for founders planning an exit.

While the “double taxation” aspect requires careful planning, the potential for lower corporate tax rates on retained earnings, robust benefit deductions, and investor appeal means C-Corp tax implications should not be dismissed out of hand for businesses with significant growth plans.

3.3 Re-evaluating Your Structure as Your Business Grows

Your business is a living, breathing entity, and just as it evolves, so too should its tax strategy. The entity choice you made when you first started might not be the most tax-efficient as your business scales, your profits soar, or your goals shift. Regularly re-evaluating your structure is a smart proactive planning move.

• Profit Increases: As your profits grow, the potential self-employment tax savings of an S-Corp election (for an LLC or C-Corp) become more significant. What might have been too much administrative burden for a small profit could become a no-brainer with substantial earnings.
• New Owners or Investors: Bringing on new partners or seeking outside investment often necessitates a change in legal structure to accommodate equity stakes, voting rights, and liability concerns. C-Corps are typically favored by institutional investors.
• Expansion into New States/Countries: Different states have varying tax laws for different entity types. Expanding your geographical footprint might require a re-evaluation to optimize state tax liabilities.
• Change in Business Activities: A significant shift in your business model or industry could open up new tax benefits or expose you to new liabilities, prompting a structural review.
• Changes in Tax Law: Tax laws are not static. New legislation at the federal or state level can create new incentives or disadvantages for certain entity types, making a review essential.

Don’t assume your initial choice is forever. Periodically consulting with a tax professional to discuss your business’s current state and future plans can help ensure your entity structure remains optimized for tax efficiency and liability protection, providing ongoing pass-through entities or corporate tax benefits.

4. Leveraging Retirement and Employee Benefits for Tax Advantages

Smart businesses understand that investing in their people – including themselves – isn’t just good for morale and retention; it can also be a powerful tax-saving tool. By strategically offering retirement plans and employee benefits, you can enjoy significant tax deductions for your business while simultaneously building financial security for yourself and your team. It truly is a win-win scenario, offering incredible employee benefits tax deduction opportunities.

4.1 Setting Up Retirement Plans for Yourself and Employees

Contributing to retirement plans is one of the best ways to save on taxes while planning for your future. For small business owners, there are several excellent options that allow you to make tax-deductible contributions, reducing your current year’s taxable income.

• SEP IRA (Simplified Employee Pension Individual Retirement Arrangement): Easy to set up and administer, a SEP IRA allows employers (including self-employed individuals) to contribute a significant percentage of an employee’s (or owner’s) compensation, up to a maximum dollar amount annually. Contributions are 100% tax-deductible for the business and grow tax-deferred. It’s an excellent choice for businesses primarily looking to save for the owner and a few employees.
• SIMPLE IRA (Savings Incentive Match Plan for Employees Individual Retirement Arrangement): Best for businesses with 100 or fewer employees, a SIMPLE IRA requires employer contributions (either a matching contribution or a fixed 2% of compensation). Employees can also make pre-tax contributions. This plan has lower administrative costs than a 401(k) but higher contribution limits than a traditional IRA.
• Solo 401(k) (or Individual 401(k)): Specifically designed for self-employed individuals and business owners with no full-time employees other than themselves or a spouse. A Solo 401(k) allows for both “employee” contributions (up to the standard 401(k) limit) and “employer” profit-sharing contributions (up to 25% of compensation), significantly increasing total contribution limits compared to other plans. All contributions are tax-deductible. This is an exceptional tool for maximizing small business retirement plans and reducing taxable income.
• Traditional 401(k): For businesses with more employees, a traditional 401(k) allows both employer and employee contributions, offering higher contribution limits and greater flexibility. While more complex to administer, the tax benefits for both the business and employees are substantial.

Each dollar you contribute to these plans is a dollar that isn’t taxed in the current year, providing immediate tax relief and setting you up for a financially secure future.

4.2 Tax-Advantaged Health and Fringe Benefits

Providing health insurance and other fringe benefits isn’t just a powerful way to attract and retain top talent; it can also be a significant tax-deductible expense for your business. The IRS encourages businesses to offer these benefits by allowing them to be written off.

• Health Insurance Premiums: For C-Corps, health insurance premiums paid for employees (including owner-employees) are 100% tax-deductible. For self-employed individuals (sole proprietors, partners, S-Corp shareholders), premiums for medical insurance can often be deducted from your gross income, reducing your adjusted gross income (AGI), though not as a business expense on Schedule C. This is a crucial area for health insurance tax breaks.
• Health Savings Accounts (HSAs): If paired with a high-deductible health plan, contributions to an HSA are triple tax-advantaged: deductible when contributed, grow tax-free, and withdrawals are tax-free for qualified medical expenses. Employers can deduct contributions made on behalf of employees.
• Qualified Fringe Benefits: Certain other benefits, such as group term life insurance (up to a limit), adoption assistance, dependent care assistance, and qualified transportation benefits, can also be tax-deductible for the business and often tax-free to the employee. These fringe benefits enhance your compensation package without increasing taxable income for employees or yourself.

Carefully structured benefit plans can offer substantial tax advantages while boosting employee morale and loyalty.

4.3 Education and Training Benefits for Employees

Investing in your team’s skills and knowledge is a strategic move that pays dividends in improved productivity, innovation, and employee retention. Happily, it’s also a tax-deductible expense for your business!

When you pay for or reimburse employees for job-related education or training, these costs are generally 100% deductible as business expenses. This includes:

• Tuition for courses or degree programs related to their job
• Fees for seminars, workshops, or conferences
• Costs of professional certifications or licenses
• Books, supplies, and other educational materials

To qualify, the education must maintain or improve skills needed in the employee’s current job or meet the express requirements of the employer or the law. It cannot be for education needed to meet the minimum requirements of a new job or a new trade or business. By making these investments, you’re not only developing a more skilled workforce but also reducing your taxable income, proving that learning can indeed be very profitable!

5. Proactive Planning: Year-End Moves and Long-Term Strategies

Effective tax planning isn’t a scramble just before April 15th; it’s an ongoing, strategic process that unfolds throughout the year. By taking a proactive approach, especially with smart year-end moves, you can significantly reduce your current tax bill and build a more resilient financial future for your business. This is about more than just compliance; it’s about intelligent long-term tax strategy.

5.1 Smart Year-End Tax Moves to Reduce Your Current Bill

As the year winds down, there are several tactical steps you can take before December 31st to minimize your current year’s tax liability. These year-end tax planning maneuvers often involve timing your income and expenses strategically.

• Accelerate Deductions: If you anticipate being in a lower tax bracket next year or simply want to reduce this year’s taxable income, consider paying deductible expenses before the end of the year. This could include:
  • Purchasing office supplies or inventory.
  • Paying next year’s rent or insurance premiums (for up to 12 months in advance).
  • Making repairs or maintenance on equipment or property.
  • Paying outstanding invoices for professional services.
  • Donating to charity (if your business is a C-Corp or if it’s a pass-through and you itemize personally).
• Defer Income: If you expect to be in a higher tax bracket this year, or simply want to push income recognition into the next tax year, you might defer invoicing clients or receiving payments until January. This is often more feasible for service-based businesses.
• Maximize Retirement Contributions: Contribute the maximum allowable to your SEP IRA, SIMPLE IRA, Solo 401(k), or other retirement plans. You often have until the tax filing deadline (including extensions) to make these contributions for the previous year, but doing it earlier helps your cash flow.
• Section 179 and Bonus Depreciation: If you’re considering purchasing new equipment or vehicles, placing them in service by December 31st allows you to take advantage of Section 179 expensing or bonus depreciation, deducting a significant portion or even the full cost in the current year. This is a powerful tax deferral strategy.
• Review Inventory: Write off obsolete or unsellable inventory to reduce its value and your taxable income.
• Reconcile Books: Ensure your bookkeeping is up-to-date and accurate, catching any missed deductions or errors before tax season.

These steps, when carefully considered, can lead to substantial reductions in your current year’s tax bill.

5.2 The Value of Professional Tax Advice

While this guide provides a wealth of information, there’s simply no substitute for personalized, professional tax advice. A qualified CPA or tax advisor brings a deep understanding of the ever-changing tax code, specific industry nuances, and your unique business situation. They can uncover opportunities and navigate complexities that a business owner might easily overlook.

• Tailored Strategies: A tax professional can analyze your specific business structure, revenue streams, expenses, and growth plans to craft a truly optimized tax projection and strategy.
• Compliance Assurance: They ensure you’re meeting all federal, state, and local tax obligations, helping you avoid costly penalties.
• Maximizing Deductions & Credits: Experts are adept at finding every legitimate deduction and credit your business qualifies for, including specialized industry-specific breaks.
• Navigating Complexities: From sales tax and payroll taxes to multi-state operations and international tax considerations, a professional can guide you through the intricate tax landscape.
• Audit Support: Should your business ever face an audit, having a tax professional by your side can make the process significantly smoother and more successful.

Often, the savings a good tax advisor can identify far outweigh their fees, making their services a wise investment in your business’s financial health.

5.3 Avoiding Common Tax Mistakes and Penalties

Even with the best intentions, it’s easy for US businesses to stumble into common tax pitfalls that can lead to unnecessary penalties and headaches. Awareness is the first step in avoiding tax penalties and ensuring better audit preparedness.

• Poor Record-Keeping: As mentioned, this is paramount. Failing to keep organized, detailed records for all income and expenses is a primary cause of audit issues and missed deductions. Always keep receipts, invoices, and bank statements for at least three to seven years.
• Misclassifying Workers: Incorrectly classifying employees as independent contractors (1099 workers) can lead to significant penalties, including back taxes for Social Security, Medicare, and unemployment, plus interest. The IRS has strict criteria for distinguishing between the two.
• Missing Estimated Tax Payments: Many new businesses (and even established ones) underestimate their tax liability or simply forget to make quarterly estimated payments, resulting in underpayment penalties.
• Ignoring State and Local Taxes: Beyond federal taxes, businesses must comply with various state and local taxes, including state income tax, sales tax, property tax, and specific industry taxes. These vary wildly by location.
• Not Separating Business and Personal Finances: “Commingling” funds makes bookkeeping a nightmare, obscures your business’s true financial picture, and can even jeopardize your liability protection (especially for LLCs and corporations). Always have separate bank accounts and credit cards for your business.
• Failing to Keep Up with Tax Law Changes: Tax laws are dynamic. What was deductible last year might not be this year, or new credits might have emerged. Staying informed (or having a professional do it for you) is crucial.

By being vigilant and proactive in these areas, you can significantly reduce your risk of costly errors and ensure your business’s tax strategy is on solid ground.

Frequently Asked Questions

What is the single most important tax-saving tip for a new US small business?

For a new US small business, the most important tip is to set up excellent record-keeping from day one and understand your business entity’s tax implications. Good records are crucial for claiming all eligible deductions, and the right entity choice can significantly impact your tax burden. Don’t wait until tax season to get organized!

How often should I review my business’s tax strategy?

You should ideally review your business’s tax strategy at least annually, especially before year-end, to make proactive adjustments. However, it’s also wise to revisit it whenever there are significant changes to your business (e.g., substantial growth, new services, hiring employees) or to US tax laws.

Can I deduct my home office expenses if I work from home?

Yes, if you meet specific IRS criteria for using a portion of your home regularly and exclusively for business, you can deduct home office expenses. This can include a portion of your rent/mortgage, utilities, internet, and depreciation. The IRS offers both a simplified option and a regular method for calculation.

Is it better to be an LLC or an S-Corp for tax purposes?

The “better” choice depends on your specific situation. An LLC offers flexibility in taxation, while an S-Corp can potentially save you on self-employment taxes by allowing you to pay yourself a “reasonable salary” and take the remaining profits as distributions. Consulting with a tax professional is highly recommended to determine the best fit for your business, considering your income level and administrative capacity.

What’s the difference between a tax credit and a tax deduction?

A tax deduction reduces your taxable income, meaning you pay tax on a lower amount. A tax credit, on the other hand, directly reduces the amount of tax you owe, dollar for dollar. Tax credits are generally more valuable than deductions because they directly reduce your tax bill, rather than just your taxable income.