Want to save money on your business tax bill? These are the top tips across the board.
Fund a Retirement Plan
Setting up and funding a retirement plan for yourself and employees can save you money on taxes, and it’s easier than you might think. Just make sure it’s a qualified plan (qualified by the IRS, that is), so you can take advantage of those tax savings.
Take Tax Credits to Lower Your Business Income
Tax credits are the federal government’s way of encouraging businesses and individuals to do things (or not do things). This article lists lots of tax credits your business can use to reduce income.
For example, you can take tax credits for hiring employees, doing research, “going green,” providing access to disabled employees and the public, and providing health coverage for employees.
Buy Equipment, Vehicles for Depreciation Deductions
Businesses have the opportunity each year to accelerate depreciation on purchases of business equipment and vehicles. Depreciation benefits your business by giving you more deductions for expenses for purchasing business assets.
The two most common types of accelerated depreciation are Section 179 deductions and bonus depreciation.
Section 179 deductions allow you to immediately take costs of buying assets
and bonus depreciation is an extra benefit for buying new assets.
Both depreciation programs have been increased, so it’s a good time to talk to your tax preparer if you have purchased major assets.
Deduct Gifts, Awards, Bonuses
You may be able to deduct part of the cost of giving gifts to employees, customers, and vendors. In addition, you may deduct awards and bonuses to employees.
All of these deductions have restrictions and limits so read carefully and consult your tax advisor before making any decisions. You also need to know the tax implications of these benefits to employees.
Stock Up and Prepay to Reduce Net Income
Before the end of each year, review your current expenses and, if you think you can benefit from reduced income, prepay some of those amounts. You can also increase expenses (and decrease income) by stocking up on supplies.
Write Off Obsolete Inventory and Equipment
Another way to cut taxes is to write off obsolete equipment and inventory that has lost its value. These write-offs reduce your cost of goods sold and can decrease your net income.
Write Off Bad Debts to Lower Income
If your business operates on the accrual accounting method, The end of the year is the time to review your customer accounts. Find those customers who aren’t going to pay. You can write off the amounts they owe as “bad debts,” and deduct these amounts from your business income to save on taxes.
Defer Income, If Taxes Will Be Higher
Timing income is a method of moving income from one year to another. You first have to determine which year will have the highest taxes, because of two factors (1) your business income, (2) business tax rates.
Pay Bills Now for Lower Income in the Current Year
Timing expenses work the same way as timing income, only in reverse. Put the expenses in the year of higher taxes, to reduce your net income in that year.
Check With Your Tax Advisor
Before making any decisions that can affect your business tax return or spending money to save on taxes, consult us.