Tax Reduction Strategies for Small Businesses

Qualified retirement plans

It’s not just the employees who benefit from qualified retirement plans. As owners, you will enjoy higher employee retention, while reducing your tax bite. Speak to one of our business coaches to find out which qualified plan works best for your business.

Using depreciation for tax planning

Because of the wide ranging depreciation options for small businesses, equipment depreciation brings great flexibility into taxable income. You may be able to:

  • Prepare a multi-year equipment acquisition budget.
    Working with one of our CPA’s can help you fine tune the acquisitions for the most beneficial tax benefit.
  • Coordinate this budget with year-end tax planning. In a year of higher income, the benefits of the Section 179 asset expensing election may make it a good idea to accelerate the purchase of some or all of next year’s assets into this year. Alternatively, if next year’s profits are expected to be higher, perhaps it makes sense to delay later additions this year until next year.
  • Understand how mid-quarter depreciation works. If more than 40 percent of your additions are placed in service in the last quarter of the year, your first-year depreciation is recalculated and probably reduced. Thus, a budget that plans large additions in the last quarter may need to be accelerated by a few months.
  • Clean up your depreciation schedule. Each year, remove abandoned and retire assets to reduce your property tax bill.

Talk to a coach if business isn’t flourishing

Periods of economic downturn can be the most important time for tax planning. Our advisers can help to ensure your business gets the full benefit of any losses from operations. If your business is a Partnership, S Corporation or LLC, our advisers will consider owner basis issues to make sure that any losses are deductible in the most beneficial period.

Cost segregation

If you have acquired or substantially renovated a building in the last 10 years, consider a cost segregation study. A study tracks the underlying costs in a project to the specific assets received, usually shortening depreciation life in the process. For land, a study can accelerate depreciation deductions by allocating costs to fencing, paving, landscaping, etc. For the building, expect accelerated depreciation from carpeting, cabinetry and some electrical, plumbing and ventilation work, just to name a few.

Selling your business in the future? Plan ahead.

Depending on the structure of the entity and the selling transaction, the tax results can vary wildly. Discuss with our advisors your long-term exit strategy so that the proper groundwork can be laid today. If your business is a C corporation, special attention is needed to minimize the effect of double taxation. Effective tax planning can make a tangible difference in your company’s’ cash flow. Tax planning is concerned with the timing and method of reporting income and deductions. The basic philosophy is to defer the payment of tax. Accelerating deductions and postponing recognition of income items typically accomplish this. There are many ways to save tax dollars. Finding the ones that apply to you can be time consuming and confusing. Our accountants can provide you with superior technical and analytical skills to help you minimize your taxes and maximize your bottom line.

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