Fall is the perfect time to start tax planning for 2017. By taking the time now to meet with your tax advisor, you can proactively access your taxes, and can take advantage of tax provisions, deductibles and credits to reduce your tax liability. The goal of tax planning is to reduce taxes, and have more control of your assets and investments.
Here are a few quick tips to get you started.
Bonus Depreciation and Section 179
If you will need equipment for your business in the future, consider purchasing it prior to year end to take advantage of the biggest deductions available to businesses - business depreciation deductions. Code Section 179 allows a maximum deduction of $510,000 for qualifying property in 2017. This amount is reduced dollar-for-dollar to the extent that purchases exceed $2,030,000. A Bonus depreciation deduction of 50% is again available for 2017 on qualifying property. In 2018, it will phase down to 40% and 30% in 2019.
De Minimis Repairs
Another deduction available to businesses is repairs that are subject to the repair and capitalization rules. Effective last year, the IRS increased the deduction available for business repairs from $500 to $2,500. So instead of having to capitalize those pesky repairs you did for $2,000, expense them, provided they meet certain requirements. And while you’re thinking of it, update your written capitalization policy to comply with this regulation.
Basis in Pass-through Entities
For any partner in a partnership, or shareholder in an S corporation that is anticipating a loss in their entity for 2017, you should review your basis. If you do not have enough basis, you may not be able to deduct the loss on your personal return. You should consider increasing your basis, if possible, to the entity to be able to deduct the loss.
Consider offering benefits to your employees to help retain them! This may include starting a retirement plan that, in addition to retaining your employees, will help them save for their future. Retaining employees can have long term impact on your bottom line as you reduce training costs from reduction in turnover. As the business owner, you can also take advantage of the retirement plan. Consider putting your spouse on payroll to have them defer to their retirement plan too!
There is no better time than today to review your 2017 financials with your tax advisor so reach out to The McQuillan Group to start planning to minimize your tax bill for April 2018!
Written by Kevin McQuillan. Mr. McQuillan is a Certified Public Accountant, and Co-Founder of The McQuillan Group. A boutique accounting firm in Pittsburgh, Pa.