Image by Perawit Boonchu
Many business owners find they can plan their futures, operate their businesses more efficiently year-round, and take maximum advantage of tax savings when they file their returns.
Before filing your tax returns, ask your tax advisor about these strategies:
1. If you need equipment and the price is right, make your purchases.
You can take advantage of Section 179 deductions.
Section 179 of the IRS tax code is an incentive to stimulate economic growth that encourages companies to invest in themselves by purchasing equipment and software. It allows businesses to write off or deduct such purchases bought or financed in the tax year. The amounts are deductible from the gross business income.
For example, your business can deduct the full cost of purchased equipment — up to $2.5 million. Check with you tax advisor or visit: IRS.
2. Enhance your retirement account
Many baby boomers have learned about retirement the hard way because they weren’t proactive. Retirement has come before they knew it.
It’s much easier to make contributions to a qualified retirement plan periodically throughout the year instead of waiting until the last second. Again, the IRS-information source to start: IRS.
3. Include a vacation on your business trips
Personal expenses for recreation, of course, aren’t deductible. But business expenses are deductible eight ways.
4. Look for reasons to entertain your customers
If you can have a substantial business discussion, fully 50 percent of the entertainment and meal expenses qualify as write-offs. A husband-wife business team will find this to be a wonderful practice.
5. Entertain your employees
You can celebrate holiday occasions, such as July 4th or Labor Day, and deduct 100 percent of the expenses if you include all employees. (Again, ordinarily, only 50 percent of business entertainment expenses are deductible.)
You can write off minor repairs. But know the difference between repairs and improvements.
6. If you forecast an S-corporation loss, plan to recoup your money
S-Corp shareholders can deduct losses up to their stock value. So if you’re forecasting a loss this year, increase your basis in your stock, if necessary to avoid a big hit.
In such a loss, you have two options — lend money to the S corporation or add capital to it.
7. Launch a startup
You can write off the expenses in starting your business.
Note: Turning a hobby into a business can be tricky. You must be able to demonstrate your hobby has become a business with the goal of earning profits.
Documentation counts. You can’t deduction a loss otherwise. If you can provide documentation, the IRS will penalize you under its “hobby loss” rules.
8. Make repairs
You can write off minor repairs. But know the difference between repairs and improvements. It might seem odd, but the IRS will treat painting the premises or major overhauls as improvements, which aren’t deductible.
9. Rent
Rent paid for office space or a warehouse is deductible. If you own the property, the mortgage interest and property taxes may be deductible.
10. Utilities
Costs for electricity, water, gas, trash pickup, internet, and phone services are deductible.
11. Office Supplies and Equipment
Everyday supplies like paper and ink, as well as minor equipment purchases, are deductible — provided the expenses are considered “ordinary and necessary” for your business operations.
12. Repairs and Maintenance
Routine upkeep of business property and equipment is deductible, but major improvements that increase a property’s value must be capitalized.
13. Insurance
Premiums for various business insurance types, such as liability, malpractice, workers’ compensation, and health insurance for employees, are deductible.
14. Taxes and Licenses
Business property taxes, payroll taxes, and fees for necessary licenses and permits are deductible.
15. Employee and Professional Expenses
Compensation paid to employees, including salaries, bonuses, and commissions, is deductible.
Contributions to health plans, retirement programs, and dependent care assistance are deductible business expenses.
Fees paid to lawyers, accountants, consultants, and tax preparers for business-related services are deductible.
Expenses for training that maintains or improves the skills required for employees’ current jobs are generally deductible.
16. Business Meals
Generally, 50 percent of the cost of business meals can be deducted if they meet specific IRS requirements (e.g., business must be discussed immediately before, during, or after the meal).
17. Advertising and Marketing
Expenses for promoting your business, such as website development, online ads, and promotional materials, are deductible.
18. Business Gifts
You can deduct up to $25 for gifts given to each client or customer per year.
19. Vehicle and Home Office Expenses
Businesses can use either the standard mileage rate or deduct the actual expenses (gas, repairs, insurance) for the business use portion of a vehicle.
If you use a portion of your home exclusively and regularly for business, you may be able to deduct a portion of your mortgage/rent, utilities, and insurance.
Conclusion: Again, before filing your tax return, ask your tax advisor about these strategies.
From the Coach’s Corner, more tips:
11 Payroll and Tax Tips for Small Businesses — To stay competitive in this difficult marketplace, it’s vital to be proactive on your taxes.
4 Tax Tips for Your Home Office Write Offs — The best tip I ever got from a CPA was to move my firm from a rented office space to my home. But it was important to understand the tax code for qualified write offs.
Keys to Protect Yourself from Skyrocketing Trend – Tax Identity Theft — Tax identity theft is increasingly victimizing Americans, according to the Internal Revenue Service. As many as 1.5 million Americans were hit by tax-refund fraud in 2013, according to IRS Special Agent Kenneth Hines in a 2014 published report.
Financial Tips for Taking the Plunge to Buy a Business — So you’ve decided to take the plunge in buying a business. Congratulations. I salute such bravery. Owning a business represents one of America’s great fundamentals — our free-enterprise system. You’ll have multiple financing options.
“The only difference between death and taxes is that death doesn’t get worse every time Congress meets.”
-Will Rogers
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