Updated: Mar 2
This year is rapidly coming to a close. I hope the year has gone as well as you had hoped! What are some prudent things to review here in the 4th quarter as a business owner? Here are three:
Are you maximizing your business retirement plan?
A pre-tax contribution to a retirement plan is likely to be your largest lever when it comes to controlling your tax liability. Do you have a SIMPLE or a SEP IRA and you currently need to shelter more income from taxes? In 2019 the maximum contribution to a SIMPLE IRA is $13,000 and age 50+ is $14,000. If you are looking for more tax savings perhaps a Solo 401k or a group 401k depending on the number of employees you have, may be a great enhancement to your tax savings potential.
Business use of your car
For business mileage the IRS provides a $.58 mileage deduction. For business owners that spend a lot of time in the car, this can be one of the best deductions after the pre-tax retirement plan contributions mentioned above. Some smart phone apps that are great for making the task of tracking mileage easy are Mileage Tracker by MileIQ, Hurdlr: Mileage Tracker or EasyBiz Mileage Tracker.
Depreciation on equipment
The section 179 deduction allows business owners the opportunity to deduct the purchase of up to $1 million of assets when you start using them during the tax year. Depreciating the expense of certain assets commonly have been allowed only over the course of several years. You can see the benefit of being able to take that deduction 100% in the first year. This deduction is limited to the businesses taxable income, so you cannot use it to create a net loss, but losses can be carried forward on next year's tax return.
Our team of CPA’s regularly reviews all of the deductions and strategies for our business owner clients each year. If you’d like to have your own forward looking plan for tax strategies, please contact me here or at 866-360-2724.
*Please consult your tax advisor.