Jean Murray writes Now's the time to start planning to save on your business taxes for 2013. The SBA has some suggestions:
If your business is going better than expected:
- Consider setting up an IRS-qualified retirement plan
- Buy new equipment or vehicles to take advantage of depreciation write-offs
- And don't forget to increase your estimated taxes to avoid underpayment penalties
One of the best ways you can increase tax deductions in 2013 is to take advantage of favorable depreciation deductions on the purchase of new and used business assets.Section179.org says,
Due to the extension of Section 179 under the 'HIRE Act of 2010' - the enhanced limits under the 'Jobs Act of 2010' - and the extension of the enhancements into 2013 via the 'American Taxpayer Relief Act of 2012' - you can basically write-off 100% of the equipment and software your business needs to buy or finance up to $139,000 this year!
- Section 179 benefits on capital purchases up to $2 million, with a deduction limit of $500,000, if your business has a profit in 2013
- Additional 50% bonus depreciation on purchases of new equipment or vehicles.
- For either Section 179 or bonus depreciation, the asset must be put into service (used) before December 31, 2013.
You have 4 months to do some tax planning, but be sure to check with your tax advisor before you make any business decisions, including purchasing that new business vehicle.
What are the Depreciation Changes for 2013 Business Taxes?
Jean Murray further writes: Each year for the past few years the Congress has changed the depreciation rate, usually increasing it to encourage businesses to purchase capital assets like equipment and vehicles.
Here's how depreciation works: You buy business equipment or vehicles, which are a business expense. Since these business assets have a long life, the benefit to your business as a business expense is spread over a specific number of years, depending on the "useful life" of that specific asset. But in recent years laws have been passed to stimulate business spending by increasing the amount of asset purchases business can count as an expense in the first year after purchase. This increase in depreciation is called accelerated depreciation.
Talk to your tax advisor
Depreciation is a complicated subject and each business situation is different. Not all assets may qualify for these forms of accelerated depreciation, and these may be other restrictions on specific types of assets, so be sure to check with your tax advisor before buying a business asset in 2013.
Depreciation is a complicated subject and each business situation is different. Not all assets may qualify for these forms of accelerated depreciation, and these may be other restrictions on specific types of assets, so be sure to check with your tax advisor before buying a business asset in 2013.
Section 179 depreciation is an accelerated depreciation rate that is described in Section 179 of the Internal Revenue Code. The 2013 maximum for Section 179 depreciation deductions is $500,000, on up to $2 million of property. That means that you can take up to $500,000 of the cost of up to $2 million of qualified assets off your business taxes for 2013, if you have put these assets into use in 2013. If you buy an asset in 2013 and you don't use it this year, you can't use this accelerated depreciation allowance.
Section 179 depreciation can only be taken if you have a business profit; it can't be used to offset a business loss in 2013.
Bonus depreciation is an additional amount of depreciation that can be taken on purchases of new business assets. Currently (2013) a business can take an additional 50% of the cost of original equipment in the year it is first used. Bonus depreciation can be taken on assets with a useful life of 20 years or more, qualified leasehold improvements, and certain computer software. Other more specific types of assets may qualify for bonus depreciation; read more about what the IRS says about special depreciation allowances.
Bonus depreciation cannot be taken on used equipment. But bonus depreciation can be taken for more than taxable income, creating a net loss and can be added to Section 179 deductions.
Calculating Your Depreciation Deduction
If you are wondering how a Section 179 and bonus depreciation might save you on taxes, you can check out this provided by Crest Capital. First, the Section 179 deduction is calculated, up to the maximum. Then, if the asset cost is over the maximum, bonus depreciation is calculated. The calculator shows your total first year deduction and the lowered cost of purchasing the equipment, vehicle, or software. If you are buying multiple assets, enter the total cost of all assets to see the total tax savings.
If you are wondering how a Section 179 and bonus depreciation might save you on taxes, you can check out this provided by Crest Capital. First, the Section 179 deduction is calculated, up to the maximum. Then, if the asset cost is over the maximum, bonus depreciation is calculated. The calculator shows your total first year deduction and the lowered cost of purchasing the equipment, vehicle, or software. If you are buying multiple assets, enter the total cost of all assets to see the total tax savings.
U.S. states and accelerated depreciation
Some states may opt out of bonus depreciation for state income tax purposes, and some states have laws regarding Section 179 deductions that are different from federal laws. Your total tax situation, both federal and state, should be taken into account when determining depreciation allowances.
Some states may opt out of bonus depreciation for state income tax purposes, and some states have laws regarding Section 179 deductions that are different from federal laws. Your total tax situation, both federal and state, should be taken into account when determining depreciation allowances.
More about Depreciation
More about Depreciation and Business Assets
Tax Planning Basics for Businesses
Minimize Income, Maximize Deductions, Use Credits, Review Financial Statements
Lastly Jean Murray writes: It's never too late or too early to do business tax planning. The best time to tackle tax planning is mid-year, because you still have time to put strategies into action. But even at the end of the year, there may be opportunities you can take advantage of.
First, go back to the basics of tax planning
William Perez, Guide to Taxes, suggests that your tax planning goal is to (a) minimize income, (b) maximize expenses, and (c) take advantage of tax credits. There are many ways to conduct tax planning, and the best time to do tax planning is now. Check with your tax advisor about any strategy you think you might be able to use. Look at some ways to plan to create strategies to do as much as legally possible to create the best possible tax situation for your business.
William Perez, Guide to Taxes, suggests that your tax planning goal is to (a) minimize income, (b) maximize expenses, and (c) take advantage of tax credits. There are many ways to conduct tax planning, and the best time to do tax planning is now. Check with your tax advisor about any strategy you think you might be able to use. Look at some ways to plan to create strategies to do as much as legally possible to create the best possible tax situation for your business.
Consider your Business Type
Your business type can make a big difference in the amount of tax you pay. And business situations change. Companies go from being in the red to making a profit, and the life cycle of a business may take you up and down. While it's not a good idea to change your business type often, there's something to be said for reviewing your situation with a tax attorney or CPA and considering changing your business type to capture tax advantages from your company's situation. Take a look at the articles below and discuss your options with your tax advisor.
Your business type can make a big difference in the amount of tax you pay. And business situations change. Companies go from being in the red to making a profit, and the life cycle of a business may take you up and down. While it's not a good idea to change your business type often, there's something to be said for reviewing your situation with a tax attorney or CPA and considering changing your business type to capture tax advantages from your company's situation. Take a look at the articles below and discuss your options with your tax advisor.
- Factors to consider in selecting a business type
- Business types and self-employment taxes
- Business Taxes and Business Profits
Buy Equipment, Take Advantage of Depreciation Deductions
Section 179 Accelerated Depreciation
With increased Section 179 depreciation deductions in 2011, you can claim a tax deduction for the entire cost of new and used equipment and software. The Section 179 deduction in 2011 is now $500,000 (up from $250k previously). The deduction is good on the purchase of new and used equipment, including new software. This depreciation deduction expires at the end of 2011, so consider buying now rather than waiting.
With increased Section 179 depreciation deductions in 2011, you can claim a tax deduction for the entire cost of new and used equipment and software. The Section 179 deduction in 2011 is now $500,000 (up from $250k previously). The deduction is good on the purchase of new and used equipment, including new software. This depreciation deduction expires at the end of 2011, so consider buying now rather than waiting.
Bonus Depreciation
In addition to the Section 179 depreciation deductions mentioned above, you can also claim up to 100% bonus depreciation on the cost of new (not used) equipment and software. You must place the assets in service (start using it) by December 31, 2011. This tax break also applies to vehicles, and it also expires December 31, 2011 unless the Congress decides to extend it.
In addition to the Section 179 depreciation deductions mentioned above, you can also claim up to 100% bonus depreciation on the cost of new (not used) equipment and software. You must place the assets in service (start using it) by December 31, 2011. This tax break also applies to vehicles, and it also expires December 31, 2011 unless the Congress decides to extend it.
Improve facilities for More Depreciation Deductions
The tax laws usually don't consider real estate in the Section 179 deduction section. But for 2010 and 2011 you can deduct up to $250,000 of qualified improvement costs for certain kinds of real property: interiors of leased non-residential buildings, restaurant buildings, and interiors of retail buildings. If you need to make improvements, do them now, because the tax break won't be available after 2011 unless it is extended by Congress.
Because the economy is still unstable, the tax laws are more flexible in allowing you to carry back net operating losses. You can carry back NOLs for more years, to offset gains in those years. This one's tricky, so check with your tax advisor if you think you will have a loss in 2011.
Capture Business Travel Costs
With the IRS standard mileage rate increased to 55.5 cents beginning July 1, 2011, make sure you are capturing every mile driven for business purposes. All of those miles driven should be logged as they are driven, because the IRS may not allow the deduction if you can't show "contemporaneous" (at the time it happens) records. Other travel costs are deductible too, including conventions and cruises (for business purposes, of course).
Lease a Car for Business Use
2011 might be a good year to lease a car for your business. The IRS has increased the allowable first-year depreciation deduction to 100%, for business property (including some leased cars) put into use by December 31, 2012. But there's more: The Act was further amended to allow a 100% additional first year depreciation deduction for qualified property acquired after September 8, 2010, and before January 1, 2012 and put into service before January 1, 2012. The fair market value of the leased vehicle must be $18,500 or more.
2011 might be a good year to lease a car for your business. The IRS has increased the allowable first-year depreciation deduction to 100%, for business property (including some leased cars) put into use by December 31, 2012. But there's more: The Act was further amended to allow a 100% additional first year depreciation deduction for qualified property acquired after September 8, 2010, and before January 1, 2012 and put into service before January 1, 2012. The fair market value of the leased vehicle must be $18,500 or more.
Record Business Startup Costs
Whether you are in the process of starting a business, planning to start a business, or just opening your business, all of your startup costs should be recorded so you can take advantage of higher startup expense deductions. For tax years after December 31, 2009, you can deduct up to $10,000 for start-up costs, but there is a dollar-for-dollar reduction of the $10,000 deduction if startup costs exceed $60,000.
Calculate Home Office Expenses
If you work from home and you have not taken any home office deductions, now might be time to think about doing this. Before you start the process of calculating deductions, make sure (1) that you are using the office regularly and exclusively for business purposes, (2) that you make a floor plan showing the areas you use for your business and the percentage of the square feet of the home, and (3) that you keep detailed records of expenses to substantiate your deduction. Read more about home businesses and taxes, then talk to your tax advisor.
If you work from home and you have not taken any home office deductions, now might be time to think about doing this. Before you start the process of calculating deductions, make sure (1) that you are using the office regularly and exclusively for business purposes, (2) that you make a floor plan showing the areas you use for your business and the percentage of the square feet of the home, and (3) that you keep detailed records of expenses to substantiate your deduction. Read more about home businesses and taxes, then talk to your tax advisor.
Review all Business Expenses, Look for Possible Deductions
Check this article on Business Tax Deductions A to Z to see what you might be able to take advantage of. For example, look at parking tolls, coffee and beverage services in the office, taxi and bus fares, casual labor and tips, business magazines and books you bought. Those little costs can add up to big savings at tax time.
Check this article on Business Tax Deductions A to Z to see what you might be able to take advantage of. For example, look at parking tolls, coffee and beverage services in the office, taxi and bus fares, casual labor and tips, business magazines and books you bought. Those little costs can add up to big savings at tax time.
Donate Excess Inventory, Unused or Obsolete Equipment to Charity
Donations of inventory or equipment can be donated to charity for a tax deduction. For pass-through business types, like sole proprietors or LLCs, the deduction is taken on your personal tax return. Donations by corporations can also be deducted. Read more about deducting business donations to charity
Donations of inventory or equipment can be donated to charity for a tax deduction. For pass-through business types, like sole proprietors or LLCs, the deduction is taken on your personal tax return. Donations by corporations can also be deducted. Read more about deducting business donations to charity
Page 2 includes additional tax planning strategies, such as taking advantage of tax credits, planning to decrease your risk of audit, and, most important, keeping good records.
Some additional tax planning strategies, keeping in mind the basics:
- Decrease income
- Increase Allowable Deductions
- Take advantage of tax credits
To the above, add the strategy of minimizing the risk of audit.
Take all available tax credits
Tax laws regarding tax credits are always changing, but there are always tax credits you can use to reduce your tax bill. And tax credits take money off the top, so they save you more than deductions. Tax credits are usually enacted as incentives to do something, like becoming more energy efficient or hiring employees. Now is the time to make decisions to take advantage of tax credits.
Tax laws regarding tax credits are always changing, but there are always tax credits you can use to reduce your tax bill. And tax credits take money off the top, so they save you more than deductions. Tax credits are usually enacted as incentives to do something, like becoming more energy efficient or hiring employees. Now is the time to make decisions to take advantage of tax credits.
Current tax credits available in 2011.
Cell phones and record keeping
Cell phones are no longer listed property, which means that you don't have to keep those detailed records separating business use from personal use. But there must still be a general accounting for personal use of company-provided cell phones. More details on this are forthcoming from the IRS. For now, just keep doing what you're doing and check with your tax advisor.
Cell phones are no longer listed property, which means that you don't have to keep those detailed records separating business use from personal use. But there must still be a general accounting for personal use of company-provided cell phones. More details on this are forthcoming from the IRS. For now, just keep doing what you're doing and check with your tax advisor.
Planning for Tax Audits
A good tax planning strategy should include planning to minimize the risk of tax audit and minimize the damage from a tax audit. Working with your tax advisor, review your tax situation and look at key audit "red flags," like losses over several years ("hobby losses"), home business deductions, salaries paid to owner/employees, and more.
A good tax planning strategy should include planning to minimize the risk of tax audit and minimize the damage from a tax audit. Working with your tax advisor, review your tax situation and look at key audit "red flags," like losses over several years ("hobby losses"), home business deductions, salaries paid to owner/employees, and more.
0 comments:
Post a Comment