By Sarah Presnell
It’s hard to believe that it’s that time of year again: end-of-year tax planning for you and your business. There’s still time left to reduce your tax bill for 2016 and plan ahead for 2017. The following article outlines potential tax-saving opportunities for you as a business owner to consider. The article tomorrow will highlight tax-saving opportunities for you as an individual taxpayer.
DEFERRING INCOME INTO 2017
If you expect your taxable income to be higher in 2016 than in 2017, or if you anticipate being in the same or a higher tax bracket in 2016 than in 2017, you may benefit by deferring income into 2017.
ACCELERATING INCOME INTO 2016
You may benefit from accelerating income into 2016. For example, you may anticipate being in a higher tax bracket in 2017, or perhaps you need additional income in 2016 to take advantage of an offsetting deduction or credit that will not be available to you in future tax years. Note, however, that accelerating income into 2016 could be disadvantageous if you expect to be in the same or lower tax bracket for 2017.
ACCELERATING BUSINESS DEDUCTIONS
- Equipment Purchases- You can expense otherwise depreciable business property if purchased before the end of the year.
- Self-Employed Health Insurance Premiums – These can be deducted at 100% for insurance paid that constitutes medical care for the self—employed person, their spouse and dependents and is not subject to the 10%-of-AGI floor.
- Domestic Production Activities Deduction – If you engage in production activities, you may be allowed to deduct a certain percentage of qualified production activities income.
- Home Office Deduction – Expenses attributable to using a home office as a business office are deductible if the home office is used regularly and exclusively.
TAX CREDITS
- Small Employer Pension Plan Startup Cost Credit – Did you start a retirement plan for your employees in 2016?
- Employer-Provided Child Care Credit – Employers may claim a credit for supporting employee child care.
- Work Opportunity Credit – Have you hired a veteran? Or someone that has been unemployed?
ESTIMATED TAX PAYMENTS
A corporation (other than a large corporation) or an individual taxpayer (or single-member LLC that is treated as a disregarded entity) generally may be able to avoid any underpayment penalties by paying estimated taxes based on 100% of the tax shown on the prior year return.
A corporation or an individual using the cash method of accounting may want to consider paying their fourth quarter state estimated taxes before December 31st, rather than in the first quarter of next year, if they are able to use a state income tax deduction for the current year. We would need to run an income tax projection to determine the best option.
THE TRUMP FACTOR
While we know the platforms that President-Elect Trump ran on from a tax perspective, what will become law is difficult to know at this point. In general, the prevailing thought is entity and individual tax burdens will be lower. Only time will tell!
If you have any questions on the above or feel that you would benefit from these strategies, please contact BCS. There is still time to implement these strategies to minimize your tax bill for 2016.