As summer draws to a close, it’s a good time to look ahead toward the end of the year and consider how you can reduce your tax bill while investing in your business.
Tax planning throughout the year can benefit your business. Not only do you avoid a higher tax bill, but you also spread out your out-of-pocket costs. This prevents the last-minute rush at the end of the year as you try to cram in a few more deductions and credits. Here are 6 business tax breaks to consider as we make the transition into the final quarter of the year:
1. Equipment Purchases
Do you need more equipment for your business? If you need a new office chair, or if your computer is dying, it’s a good time to buy that equipment. Before deducting equipment, consult with your accountant about whether or not it is something that requires a depreciation schedule. The right equipment can improve your operating efficiency and boost your business, and you’ll get a tax benefit to boot.
2. Business Travel
If you are looking for a way to improve your business, travel might be a good option. Attend a relevant conference or trade show. You’ll meet other business owners, learn useful information and even receive much-needed inspiration. These events are also ideal for finding business partners and starting joint ventures that can benefit your business. If you travel for business, you receive a tax deduction. You can deduct airfare, rental car and hotel costs. You can also deduct the cost of your registration and even a portion of your business meals. As long as you are conducting business during your travel, you can deduct a portion of your trip. This is one of my favorite business tax breaks because it’s like a vacation, even though it benefits my business efforts.
3. Work Opportunity Tax Credit
Are you planning to hire more workers? If so, consider hiring someone that will help you qualify for the Work Opportunity Tax Credit (WOTC). This credit is aimed at helping those who face barriers to employment, even though they are generally qualified. When looking at your pool of potential employees, some of those to consider include:
- Veterans with service-related disabilities.
- Families that receive certain government benefits.
- People who have supplemental income from Social Security.
The tax credit can be worth up to $9,600. A credit is valuable because that’s a dollar for dollar reduction in the tax you owe while a deduction simply reduces your taxable income.
4. Marketing Campaign
Are you hoping to drum up more business with a marketing campaign? If so, plan it to take place before the end of the year. The cost of your marketing campaign is usually tax-deductible, including costs related to developing advertisements, paying for promotion (including social media promotion) and other costs related to your campaign. Running another campaign can help drive more business and reduce your tax bill.
5. Retirement Plan
One of the best ways to boost your finances for the future is to contribute to a retirement plan. If you haven’t set up a retirement plan for your business, do so. Make it a point to contribute to your own plan (and perhaps receive a company match, depending on the type of plan you have). There are a number of different options for business owners and the self-employed, so figure out what works best for you. If you already have a plan, see if there is a way for you to boost your contribution. You’ll receive a tax benefit and provide for an improved financial future.
6. Charitable Contribution
Your business can make charitable contributions and receive a tax deduction. If you are looking for a way to reduce your business income, find a good cause. You’ll help the community, drum up some positive PR for your business and reduce what you owe to Uncle Sam.
In the end, tax planning helps your business. When you use the money to re-invest in your business, you receive even greater benefits because you’re making a business investment with tax-advantaged money.