With the stock market’s continued rally and increasing consumer confidence, it is likely that many small businesses are exceeding their own projections for profits this year. If this is the case, as a small-business owner, you should be working with your C.P.A. or tax adviser now to minimize your tax liability.
So often taxpayers wait until November or December to consult their C.P.A. to minimize their taxes; however, waiting until the end of the year can limit the moves you can make, especially for small businesses. Companies should be paying close attention to business deductions that can reduce income. While you’re likely aware you can deduct rent or home office expenses, office equipment and furniture, you should also pay attention to vehicle mileage, business meals, travel and entertainment expenses, purchasing depreciable business equipment and writing off any bad debts for the year. Self-employed individuals may be able to deduct up to 100% of health insurance costs that provide coverage for yourself, your spouse and dependents.
If profits are well ahead of your expectations, you may consider buying or leasing equipment that will allow you to expand your business in future years. The Protecting Americans from Tax Hikes Act of 2015 made the Section 179 Deduction permanent, which allows businesses to deduct the full purchase price from gross income. The limit for 2017 is $500,000 and limits the total amount of the equipment purchased to $2,000,000. Furthermore, 50% bonus depreciation is also available in 2017, which makes acquiring new property a good deal for many growing businesses.
When looking to expand your business, you’re also likely to consider hiring more staff. Consider hiring wisely and select someone from a targeted group such as qualified veterans or qualified long-term unemployment recipient. Depending on the target group of the individual hired and number of hours worked, the business may be eligible to claim a tax credit on the first-year wages paid to the new hire. Furthermore, Georgia has a state tax credit available for businesses who retrain their workers to use new equipment or new technology. Retraining tax credits can be used to offset up to 50% of a company’s Georgia corporate income tax liability.
If business is booming so much that you’ve spent a majority of your time improving your processes to keep up with demand, you may be able to benefit from the Research and Development Tax Credit. It is available to companies that invest in the development of new or improved products, manufacturing processes, and software. Like many tax credits, there are qualifications, and this one depends on the nature of the activities performed by a company and the costs incurred for those activities.
Of course, one benefit to a booming business is the ability to establish a retirement plan. Employer contributions to retirement plans as well as many plan expenses are generally tax-deductible to the business. A well-designed retirement plan can attract and retain better employees in the future, possibly reducing new employee training costs. Businesses have until Dec. 31st to establish a plan for the year, but can delay funding it until the business files its tax return for the year.
Overall, communicating with your C.P.A. on how well your business is doing can often result in your tax adviser providing you solutions that can allow you to optimize your profitability while minimizing your taxes. If your C.P.A. isn’t offering this advice throughout the year, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166.
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
