5 Year-End Tax Saving Tricks for Small Business Owners

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5 Year-End Tax Saving Tricks for Small Business
Owners
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• Its not too late to reduce the income tax hit
  youll take next April. Act now, and youll have
  one more reason to pop the cork and look forward
  to a Happy New Year.

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1. Accelerate Business Expenses

• If youre considering a major investment in
  equipment or other capital expenditures, do it
  before December 31. Then you can claim the
  deduction in your 2018 taxes next April.

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• Another thing you can do is move forward some
  normal expenses from the months ahead. For
  example, you could purchase 3 months of supplies
  rather than your usual 1 month stock. As long as
  you mail the check before December 31, you can
  deduct the entire amount from your 2018 tax.

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• Likewise, you can charge recurring expenses that
  come due in early to mid January, such as rent,
  to your credit card. Even though the credit card
  bill wont be paid until January, it counts as a
  current year deduction.

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2. Accelerate Depreciation

• You have two options for claiming depreciation
  on new and used business assets taking the full
  amount in one year or depreciating them over
  time. Taking the instant depreciation can give
  you a huge write-off now, but may not be best in
  the long run. Discuss with your tax advisor which
  strategy is right for you.

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3. Defer Income

• Generally speaking, you dont have to report
  income until the year you actually receive the
  payment for your products or services. Send out
  December invoices late in the month, so you wont
  collect the money for them until January.

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4. Make an IRA Contribution

• Money you pay into a traditional individual
  retirement account (IRA) is tax-deductible in the
  year you make the contribution. (Actually, you
  have until April 15, 2019 to make your 2018
  contribution.) As an added bonus, any interest or
  other earnings the IRA accumulates over its life
  are not taxed until you retire and begin
  withdrawing the money.

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• Note The rules are different for a Roth IRA.
  This type of IRA requires you to pay tax on
  contributions in the year theyre made, but
  withdrawals after retirement are tax-free.

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5. Take Capital Losses

• If you sell stock or other asset at a loss
  (meaning the sale price is lower than what you
  paid for it), you can write off the amount of the
  loss up to 3,000. If you made capital gains on
  other stock, you can use the loss to offset the
  gains and avoid paying capital gains tax.

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• Be aware, however, that you cant turn around
  and buy the same or similar stock right back
  after using it to claim a loss deduction. If this
  happens within 30 days, its called a wash sale
  and the IRS will disallow your tax loss.

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• Some of these tips involve deferring tax
  liability to next year, rather than completely
  eliminating it. Whether thats the smart thing to
  do depends on what you expect your income to be
  next year, what the tax rates will be and other
  factors. Xendoo tax consultants can help you
  understand the options and steer a path toward
  maximum tax benefits for your business.