Many people associate the words ?tax loopholes? with questionable accounting practices. But according to tax strategist Diane Kennedy, of http://TaxLoopholes.com, ?A loophole is nothing more than a government incentive ? tax laws are written to favor people wanting to start businesses because businesses stimulate the economy.? Tax loopholes are just legitimate deductions the government allows in order to encourage certain behaviors. Exploiting loopholes isn't about skirting the law, but rather making it work for you.

3 Steps to Reduce Taxes

1. One of the best ways to reclaim your tax dollars is by starting your own business. Owning a business allows you to take advantage of the way those laws are written. With the increase of eCommerce, it's easier than ever to start an online business. Whether you offer a product or service, an e-business is an excellent vehicle for lowering your tax liability.

2. As a business owner, it's crucial you consider the business structure in which you operate. Don't just start selling online without considering the tax implications or bothering to incorporate. Says Kennedy, ?Your business structure can save you a lot of money ? not acting on that can cost [you] tens of thousands of dollars.?

3. Many business owners miss out because they fail to take all their lawful deductions. Particularly when starting a business, you're going to encounter many expenses that you can legally deduct ? but you have to report them or they don't do you any good. It's important to keep good records of all your business-related costs because anything ordinary and necessary to the production of income is a valid deduction. Don't be afraid to take advantage of the business tax breaks the law allows:

? Home-offices. Changes in tax laws have made this a fairly simple deduction. You need a separate room used exclusively for business, and you must regularly conduct business in that room. If you meet those two criteria, you qualify for a home-office deduction.

? Business-related storage space. Unlike a home-office, this space can be multifunctional. If you use one-third of your spare room to store inventory or promotional products, and the remaining space as a wreck room, then one-third the square footage of your spare room is tax deductible.

? Wages. Rather than giving your kids an allowance, pay them to help out with your business.

? Travel. All your business travel is deductible. For validation reasons, you need to keep track of the mileage and purposes of your trips.

? Donations. Anything you donate to your business serves as a deduction. Even if your business can't afford to repay you right away and you have to take a loss there, that net operating loss can roll forward and offset future income.

Money you earn is subject to taxes ? the more you earn, the more you pay. However, when you save money by reducing your tax bill, your savings are yours to keep. Tax laws are written to foster your business? growth, so put them to good use. Take a good look at your accounting and expenses, and avail yourself of the tax loopholes and breaks your business entitles you to.