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3 Tax & Retirement Strategies for Small Business Owners

3 Tax & Retirement Strategies for Small Business Owners

February 04, 2021

As small business owners, tax time is likely not our favorite four months of the year. Once January hits, we are all laser-focused on settling our books, maximizing every tax deduction we can, and scrambling all of our documents to give to our accountants. Although our accountant’s value is immeasurable at this time, I do think many of us forget about another resource that SHOULD be helping us at this time: our Financial Advisor!

If our advisor is planning for our retirement, there is NO WAY this can be done effectively without taking a client’s taxes into consideration. Experienced financial planners and accountants work together to create the best retirement and tax solutions for their customers. Gone are the days where you pay your advisor 1% just to manage assets, we should quite frankly be doing more for that fee.

Below I’m going to share 3 helpful tax and retirement strategies that I am talking with my business owner clients this time of year!


Health Savings Accounts


Business owners or not, I encourage everyone with what is considered a High Deductible Health Insurance Plan (Individual deductible no less than $1,400 or Family Deductible no less than $2,800) to take advantage of a Health Savings Account. A Health Savings Account is a tax advantaged account specifically designed to help pay medical expenses for people with high deductibles.

So why do we need to use them?

Health Savings Accounts offer three layers of tax benefit if solely used to pay medical expenses. Clients get a tax deduction when contributing, their assets can be invested & grow tax-free inside the account, and they can take tax-free withdrawals if the assets are used on medical expenses.

The big opportunity currently for you is that you can fully fund your health savings account to get a deduction for 2020. The 2020 contribution limits are $3,550 for individuals and $7,100 for families. For individuals over 50, you can contribute an additional $1000 per individual to these plans. If a plan like this isn’t utilized, it is likely we will not get to “write-off” any medical expenses, especially if we are taking the standard deduction.

A couple contributing $7,100 into a health savings account for 2020 that is in the 24% tax bracket could save up to $1,704 ($7100 *.24) in taxes! Also, the great news is for 2021 the contribution amounts are even higher.

We set up Health Savings Accounts for clients and also help them invest the assets until they are used.

Retirement Plan Options for LLC and S Corps

 As business owners, we all know we need to save for retirement but many of us use the excuse of: “My business is my retirement!!” While this can be true for a portion of your retirement, it is also vital that this isn’t your only source of income when you are ready to retire. There are several strategies that allow us to save for retirement while also allowing that money to grow. The kicker is we can also get a TAX DEDUCTION for the year we put funds in a retirement account.

For many of my clients this time of year they have one thing on their minds: How can I shelter money to pay less taxes? Many accountants will suggest contributing to a traditional IRA which allows up to a $6000 deduction ($7000 if over 50) in 2020 and 2021, while also letting your investments grow for retirement. This option is wonderful but may not be enough for certain business owners that want to shelter more income to pay less taxes. For clients wanting to shelter more income there are several options to small business owners (Keep in mind each plan has specific qualifications and rules, so working with an advisor & accountant is crucial to take advantage of these deductions).


SEP IRAs: Can allow a business owner to put 25% of their net earnings in a retirement account; can be up to $57,000 for high earners.


Simple IRAs: The Owner can contribute to $13,500 ($16,500 if over 50) to their account, while matching themselves and their employees 3% of employee compensation.


Solo 401k: The Owner can contribute $19,500 ($26,000 if over 50) while also matching their account up to a max of $57,000; Profit Sharing & other cash balanced plans can be attached to allow an owner to shelter as much as $230,000.


Of course, a regular 401k is an option for companies that have several employees and we help business owners design plans that fit both their goals and their employee’s goals. We also help with existing plans to make sure they have the right investments and plan design for the specific company.

Just for reference: An individual in the 24% bracket that shelters $57,000 in a retirement account, could save up to $13,680 that year in taxes.

 Now as I mentioned each one of these plans have specific rules and working closely with a professional will help you determine which plan works best for your goals. As a side note, I know many small business owners are set up as S Corps in our area. S Corps work great to help shelter some self employment taxes (Social Security & Medicare) but they could also limit us in retirement saving. We’ve worked with several clients and their accountants to find the right W2 number to pay the owner as an employee to maximize self-employment and income tax savings.

Tax-Loss Harvesting in Brokerage or Individual Accounts

Many of us not only own retirement accounts but we also own individual investment accounts. These could be anything from inheriting individual accounts from our parents, trust accounts, or simply investment accounts we created to potentially grow in the market.

The tricky thing about these types of accounts is that we pay taxes on any dividends, capital gains, or trades made throughout the year. This is unlike retirement accounts in which we only pay taxes when we distribute funds in retirement.

It is important for advisors to know their client’s tax situation, so they manage these accounts efficiently.

As financial advisors, it is our job to help our clients with not only the investments inside these accounts but the tax implications these investments could have. We help clients determine when the right time is to distribute funds (if the client wants to take distributions) and take advantages of drops in the market to help lower the overall taxation for our clients. The process in which advisors use specific tax efficient strategies in hopes of minimizing taxes when possible is called tax-loss harvesting.

We work with our clients throughout the year to make sure Uncle Sam only gets his fair share and no more!


My job as a CERTIFIED FINANCIAL PLANNER™ is to help make sure all aspects of my client’s financial life are addressed once they retire. I hope you found these tips beneficial and it helped spark some ideas during this stressful season.

My firm specializes in working with business owners, people within 15 years of retirement, and retirees. If any of these strategies interested you or you would like to schedule a no-cost conversation to review your retirement plan, I would be happy to schedule a meeting at 502-331-8370 or


Also check out our website to get a feel for who I am and my story :


Patrick Portman, CFP®


Patrick Portman is a Registered Representative offering Securities and Advisory Services through UNITED PLANNERS FINANCIAL SERVICES Member FINRA, SIPC. Portman Wealth Management and United Planners are not affiliated.

Material discussed is meant to provide general information and it is not to be construed as specific investment, tax or legal advice. Please seek such advice from your own tax and legal counsel.