If you own a small business, there are many things to consider when planning your business taxes. Many times, you have choices regarding the timing of income and expenses that can impact your mental health and taxes both for this year and next. One of the best things you can do is plan your taxes and relaxation ahead of time.
Getting ahead tax planning and preparation will save you headaches, time, and money in the long run. This will allow you to get the most out of your tax preparation, rather than rushing and waiting until the last minute, missing out on opportunities for using certain strategies, and stressing your brain about the process.
Consider using some of these end-of-year tax plans for your small business:
1. Buy a work transportation vehicle. If you need to haul stuff, people, or happy workers around for your company, consider the tax advantage that comes with buying a work vehicle. “Heavy” SUVs that get 50% of their use from your business are entitled for a write-off of $25,000, thanks to IRS Section 179 first year depreciation.
⦁ There are detailed considerations to make with this write-off, so verify the depreciation rules for company vehicles before you make the purchase.
2. Purchase other equipment. First-year depreciations through IRS Section 179 come in several forms, including things other than work vehicles. If you buy used and new business software and equipment, you can take a write-off up to $250,000.
⦁ This equipment consideration includes office furniture to make workers healthy, computer systems, machinery, software, employee safety supplies, and other large-purchase items as long as you’re buying it and putting it to use in the current tax year.
3. Prepay this upcoming year’s expenses. You can prepay expenses for next year to create additional deductions for next year’s tax return. Consider prepaying employee and contractor bonuses. This will make them and you mentally happier. Pay other upcoming expenses prior to the end of this year or buy next year’s equipment now. Yes you can claim these payments as deductions and save yourself additional money before tax season.
⦁ You can pay bills using checks, and mail the checks at the end of the year. Even though they won’t be deposited or cashed until the New Year, the tax law states that you can still deduct these expenses because you mailed the checks in this tax year.
4. Delay part of your income. If you are expecting to be in the same tax bracket next year, delay some of your income until the beginning of the next year to reduce how much you will have to pay in taxes for this year.
⦁ Deferring some income, combined with accelerating some deductions, will postpone some of your tax charge and allow you to save cash when your taxes for this year are due.
5. Accelerate some of your income. The opposite is true if you know you will be in a higher tax bracket in the coming year. Here is were you need to accelerate some income into the current year while delaying some deductible expenses until the following year so that you show tax savings on your higher tax bill in the coming years.
⦁ A balance between the two, delaying and accelerating, is also viable to potentially lower both of the tax bills, the one for next year and the upcoming year’s bill .
The Bottom Line
As a business owner, it’s important to consider your tax strategies during the whole year. You have many opportunities for tax deductions and savings throughout the entire year. Even so, keeping these plans in mind as the year comes to an end will help you cheerfully maximize your strategies for both this year and next.
