1. Take Advantage of Bonus Depreciation
If you obtain a business property and place it into service after September 27, 2017, and before January 1, 2023, your bonus depreciation percentage increases to 100%. Also, vehicles in service after December 31, 2017, can claim the maximum depreciation of $10,000 for the first year (or $18,000 under the 100% bonus depreciation).
2. Take Advantage of IRC Section 179
Section 179 of the IRS code allows businesses to deduct the full purchase price of equipment and/or software in the year of acquisition up to $1,000,000. This means that the cost of personal property that is typically depreciated over seven years can be fully deducted up to $1,000,000 in the year purchased. It doesn’t it make sense to buy furniture and equipment that you don’t need to get this deduction. But if someone is planning on buying in the next few months anyway, they may want to consider accelerating the purchase prior to year-end to get the deduction this year.
3. Use Tax-Deferred Retirement Plans
The best proactive tax savings tool available to business owners today is retirement plans. No other expense allows owners to claim a deduction without having to give up the money spent for the tax benefit. Retirement plans such as solo 401k, Simple IRA, and IRA. The money usually has to be kept in a retirement account until certain age thresholds are met, but the growth on the funds is tax-deferred until a distribution is taken.
4. Take Advantage of the New IRC Section 199A
For business owners, the most important tax move you can make is to look at section 199A in the new tax law. It’s the most significant change for business owners that most people are not aware of. Self-employed business owners, or any other entity where it’s a pass-through, will all qualify for this deduction. Ahead of year-end, taxpayers can set up pension plans to reduce their income, which will make them eligible for the 20% tax deduction This deduction could amount to savings of over $100,000 in taxes.
5. Get Organized
Don’t lose time running your business in January and February by scrambling to get your books and receipts together for tax preparation. Get organized now and stay organized. Clean books and detailed supporting documentation will ensure you take advantage of all tax incentives and avoid late filing penalties and will keep your tax preparer fees down.