6 Ways to Use Your Business's Tax Refund
It’s been said that in this world, nothing is certain except death and taxes. Fortunately, recent changes in the tax law have reduced income tax rates for individuals and businesses, meaning your tax bill may not be so bad this year. In fact, you might even be getting a refund.
If you own a small business and haven’t filed your business tax return yet, it’s possible you’re in for a pleasant surprise. And if you’re one of the lucky ones who’ve already received a refund, it’s time to put that extra cash to work.\_Keep reading to find out how you can spend a tax refund to benefit your business's future.
How Can You Spend Your Business’s Tax Refund?
1. Pay Off Debt
If you’ve opened a line of credit, taken out a business loan, or used a business credit card, now’s a great time to pay off your balance and start fresh. Making on-time payments and maintaining a low debt balance help build your business credit score, which can set you up for more attractive financing in the future.
2. Reinvest in the Business
You can also use your refund to grow your business by putting the money back into the company. Perhaps you’ve been holding off on launching a new marketing campaign or developing new products and services due to a shortage of funds. Depending on the size of your refund, now may be the right time to finally move forward with your expansion plans and take your business to the next level.
3. Fund a Large Business Expense
Chances are, there’s a large expense you’ve been putting off because you don’t have the cash. Maybe your business needs new equipment, or there’s an industry conference you’d like to attend. Consider using your small business's tax refund to fund a costly one-time expense that you otherwise wouldn’t be able to afford. If you spend your refund wisely, you may benefit from your purchase for years to come.
4. Give Yourself (Or Your Employees) a Bonus
The life of a small business owner can be a grind and often requires working long hours for little pay. If you’ve been burning the candle at both ends and putting all your income back into the business, consider giving yourself a one-time bonus to reward yourself for all the hard work you’ve done.
Similarly, if you have employees that you want to keep happy, you might want to share the wealth with them — especially if they’ve taken a temporary pay cut to help you build your empire.
5. Donate to an Important Cause
According to Guardian, about 75 percent of small business owners donate a portion of their profits to charity each year. Charitable giving benefits your community and can help you build goodwill for your brand. It can also help reduce next year’s tax bill. However, since the new tax code makes it more difficult to receive tax deductions from charitable donations, be sure to follow recommended best practices to get the most out of your donations.
6. Put It in Savings
If you’re lucky enough to not have debt or any large expenses coming up, save your refund for a rainy day. As a small business owner, you know that cash flow can fluctuate, and it’s always helpful to have a cushion in the bank during those lean months. If you don’t have a business savings account, considering opening one that pays interest to give your savings a boost over time.
Conclusion: Take Time to Consider How to Best Utilize Your Tax Refund
Everyone likes an unexpected influx of cash. If you’re one of the many business owners to get a tax refund this year, take time to consider the best way to utilize it, and use it wisely. Whether you put the money back into your business, give it to charity, or save it for a rainy day, you may reap the benefits well into the future.