As the year comes to an end, its about time to start thinking about your taxes. Taxes are a burden but take advantage of the opportunities to learn some tax-saving tactics. This will not only help you personally but help your business. Taxes are complex and every changing so it’s a good idea to reach out to your financial advisor for help.
- Do not forget the deductions on new equipment.
- Section 179 of the IRS tax code was created to allow business owners to invest in themselves. This simply allows your business to deduct from gross income of full priced qualifying equipment/ software. To make sure you get your 2021 tax deduction, the equipment needs to be financed or purchased and put into service during the calendar year.
- Work on increasing your deductions.
- Did you know there was a way to put off income to the next tax year? This will reduce your adjusted gross income this year. There are some strategies to increase deductions now if your income is the same or lower than the previous year. Example: send your invoices out a few days later in December to delay receiving payment until January. You are able to prepay bills that are due in January, this will allow the deduction to go on this year’s taxes. This is just a few ways to begin some big tax savings.
- Look into designing your company retirement plan.
- How long ago did you start your first company retirement plan? If your business has changed, its about to redesign your company retirement plan. The goal is to make sure your employee incentive is still the right fit. Some options to choose from is SIMPLE IRAs, profit- sharing, and safer harbor 401ks. Talk to your advisor about how qualified plan offers a deduction for your contributions and how if defers tax on earnings.
- Think about your business structure.
- LLCs can choose to be taxed in 2 different ways, the C or S corporation. To get benefits as a business owner of an LLC, you may be eligible to tax as an S-corporation. Talk to your tax professional to see if you can apply and qualify.
- Find the positive sides to net operating loss.
- Were your business losses lingerer than your income for the year? Good news, your excess can lower your tax bill the next year due to the excess. The Jobs Act of 2017/ 2020 CARES Act explains that losses from the years of 2018- 2020 may be carried for five years. This is complex and can be difficult to follower through, we suggest consulting a professional for aid.
- Notice deductions on vehicle expenses.
- Do you use your personal car for work matters? This includes attending business meetings in other offices, out of office events, visits clients, and a few more. If yes, make sure you are getting a deduction. The standard reimbursement is .56 for the year 2021. On top of this benefit, don’t forget you can use up to 50% of claims for expense benefits. This includes gas, tires, repairs, insurance, license, registration fees, and depreciation.
Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.