Tax-Saving Strategies for Small Business Owners

It’s the final quarter of the year. You’re looking to end the year strong while planning for next year’s budget. LongSchaefer showcases some relevant and practical tax-saving strategies for small business owners in today’s tax planning blog.

Related Post: Strategic Business Planning for the Last Quarter of Any Given Year 

Capital Investments

Capital investments in equipment offer huge tax deductions for your federal income tax return. In 2020, the deduction maxes out at $1.04 million. The deduction covers new and used equipment as well as software. Accountants and tax planning specialists call this a Section 179 Deduction. The team at LongSchaefer can advise you as to what kind of equipment applies to this deduction.

Depreciation

Congress passed a law in 2017 to make it easier to depreciate any property you purchase. Depreciation occurs when a piece of equipment loses its value over time. For example, you buy a new car worth $20,000 in 2020, but in 2021 it’s worth only $15,000 because it depreciates due to wear and tear as well as normal use.

In the past, you needed to depreciate your property over time. Until the 2023 tax year, business owners can depreciate the entire value of qualifying property. You record the depreciation as an expense on your taxes, thereby lowering your tax liability. The IRS lets you depreciate up to $1.04 million in property this way.

Qualifying property includes, but is not limited to, computers, machinery, furniture, vehicles, and building equipment. The LongSchaefer tax planning team can point out what assets you have that may qualify for this deduction.

Deferring Income

Businesses can defer income by delaying sending invoices in the fourth quarter of the current year and sending them in January of the next year. The main benefit is that taxes on the income aren’t paid until next year. This strategy works if you plan on having about the same income next year. 

If your business expects to take off and you make significantly more income next year, you might consider sending those invoices in the current year versus next year. The tax planning pros at LongSchaefer will examine your situation and plan the best possible strategy for you.

Related Post: 4 Reasons to Hire a Small Business Accountant 

Tax Planning Services From LongSchaefer

We recognize that everyone’s definition of success is different. It’s part of our company culture. The tax and accounting pros at LongSchaefer can tailor a tax planning strategy to your specific situation. Contact us or call (513) 245-0300 for more information on our tax planning services and end-of-year tax strategies.

May 2020 COVID-19 Update

In order to comply with the Ohio Health Department Order & CDC social distancing recommendations, our offices are closed until further notice. Rest assured that our established protocols and available technology will allow us to provide the same level of service and quality you expect from LongSchaefer during this time.

The SBA has announced details of how it’s helping small businesses through the Coronavirus outbreak. The IRS is sending payments to families affected by this crisis. 

Please click on our Coronavirus information pages for more information.