8 Ways Small Businesses Can Save Taxes Before Year End

If you run a small business, taxes are probably one of your biggest expenses. So while it’s important to be proactive and implement good tax planning strategies throughout the year, you can still take action now to save your business money before the end of the day. end of 2021. Here are eight.

Accelerated depreciation rules allow you to buy machinery, vehicles, computers, software, furniture and other types of capital goods, and instead of having to write off those expenses over time , you can immediately deduct up to $ 1,050,000 this year. And remember: you don’t even have to pay for this stuff right away. Even if you fund the acquisition, the rules allow you to claim the deduction as long as the item is put into service before the end of the year.

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Thanks to previous COVID-19 stimulus bills, you can personally take a $ 300 deduction ($ 600 for those filing jointly) on your tax return in addition to the standard deduction this year and your business can deduct up to. to 25% of its income for charitable contributions. After 2021, the additional personal deduction disappears and the business deduction reverts to 10% of your business income. Not only is this a great way to save money on your taxes, but, if you’re active with a charity, it can also remind potential donors to give before that benefit wears off.

Admit it: those long overdue debts likely won’t get paid. And that “good deal” you got five years ago is still in your warehouse picking up dust. Use those next two weeks to throw away the old inventory and remove those old bad debts from your books. By ceding and then writing off these assets, you can benefit from a tax deduction.

Depending on the amount of your employees’ contributions, you can set aside up to $ 58,000 in your 401 (k) pension plan this year. But be sure to speak to your benefits advisor to see how much you can contribute, as there are limits for “high paid” people. Depending on eligibility, you can also contribute up to $ 6,000 to a personal IRA. The good news is that you can wait until you have filed your business and personal income tax returns to make these decisions, so you still have a little bit of time left. And don’t forget the Roth After-Tax IRAs and even 529 plans, to which you can make after-tax contributions and grow them tax-free as long as the funds are used for higher education, private school, or college. religious school expenses.

Speaking of education, and thanks to COVID-related legislation, employers can now take deductions of up to $ 5,250 each year per employee until 2025 when they help pay off student loans and employees don’t. will not be imposed. Considering the huge student loan debt many young workers carry, a special payment or bonus for them before the end of the year would be very helpful – and could be a good perk to consider in order to attract new ones. workers.

While this credit expired for most employers at the end of September this year, you can still go back and change your 2020 and 2021 federal payroll tax returns if you think you qualify. To be eligible, you must prove that you have been totally or partially closed due to COVID or that you have experienced decreases in income of 50% (for the last three quarters of 2020 compared to the corresponding quarters in 2019) or 20 % (for the first three quarters of 2021 compared to the corresponding quarters of 2019). If you’re eligible, the credit is huge – up to $ 7,000 per employee per quarter in 2021, for example – and if the credit is more than the payroll taxes you paid then you can get the refund. Many payroll services offer assistance in calculating this credit.

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This additional credit has been extended until 2025 and can reduce your taxes by up to $ 9,600 per employee per year if you hire someone who is typically either out of the military, off welfare, out of jail. or unemployed for more than six years. months (there are other eligibility requirements). If you calculate the credit before hiring a new employee – as some of my clients do – you can also share the tax savings in the form of a hiring bonus, which could make the difference in attracting this great new talent.

Employers can still claim a tax credit for compensation paid to employees (up to a maximum of $ 511 per day) for time missed to get vaccinated, including extra time in the event of reactions. The presidential mandates of November 2021 now require employers to give this leave, but at least you can get reimbursed.

The good news is that some of these tax benefits extend beyond 2021. That’s why it’s important that you meet with your account at least twice a year, say in the spring and fall, to make sure you both stay one step ahead of the rules. and make the right decisions that will reduce your tax liability in the long run.

Gene Marks is a Chartered Accountant and owner of Marks Group, a technology and financial management consulting firm in Bala Cynwyd.

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