Plan Your Taxes

Small business owners are due to meet with their advisors to plan out business and personal taxes before the end of the calendar year. Some important points to talk about this year include:

  • Tax and jobs bills passed in 2010 increased the ability for small business owners to deduct new and used equipment purchases under U.S. Tax Code section 179. Small companies are allowed to deduct the full amount of the purchases upfront, rather than depreciate the cost over many years. The deductions apply to tangible equipment and personal property purchased and used in 2011, including computers, furniture, telephone systems, certain vehicles and software, machinery used for manufacturing, and leased equipment.
  • A supplement to section 179 allows for “bonus” depreciation for companies that buy more than $500,000 in qualified equipment in 2011. It allows for 100 percent depreciation, up from 50 percent last year, and applies only to new equipment, unlike section 179. Typically, bonus depreciation would be taken after companies reach their $500,000 limit under section 179.
  • If your company’s financial situation warrants, you can talk to your CPA about accelerating deductions and deferring income into next year, but don’t use this audit-risky strategy if it doesn’t make sense.
  • On the personal side, end-of-year charitable donations and Roth IRA conversions would be items to think about before the end of the year. And as always make sure you are not going to be in a position to attract unwanted IRS scrutiny on your personal or business returns.

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