Tax Planning Ideas

Now is the time get control over your tax situation. Learn what options are available to you. Plan to maximize your tax savings. Here are some great tips! It is very important to consider your personal and business circumstances before implementing any tips.

Accelerate expenses or delay income. Many businesses pay their taxes on the cash basis, thus income is taxable when received and expenses are tax deductible when paid. Determine what year will give you the advantage.

Invest in equipment. Do you need any equipment to improve your business? By purchasing and placing in service by December 31, 2017, you can reduce taxable income by accelerating depreciation on those assets. A business can elect to expense 100% of the asset up to $500,000.

Optional Retirement plan profit sharing portion. With a 401k or SEP retirement plan a business can make an optional profit sharing contribution. To be tax deductible the contribution has to be made no later than the tax return file date. Be sure the plan is setup before the end of the year.

Vehicle expenses. If you use your vehicle for business, you can choose between deducting the business portion of the actual costs or deduct 53.5 cents per business mile. If your vehicle is used less than 50% for work, use the mileage rate. Keeping a mileage log to support your business and personal miles is required.  Before you give a raise make sure you are reimbursing your staff for the expenses they incur. Payments are not taxable to them and are tax deductible for the business.

Per diem rates for overnight travel. There is a standard per diem rate of $142 per day. This includes $51 for meals and incidentals. This rate can be higher for certain cities, refer to website.  The business can choose between the actual amounts paid or the per diem rates.

Home Office. If you work out of your home in a space used exclusively for business you can take a home office deduction. Home costs such as mortgage interest, real estate taxes, rent, utilities, insurance, maintenance, etc and prorated. The deduction is limited to the taxable income, though costs can be used next year.

Domestic Production Activities Deduction, also known as the “manufacturer’s deduction”.  If you qualify, the deduction is the smallest of 9% of the qualified activity or adjusted gross income before the deduction is applied or less than 50% of W-2 wages paid. WI also has a manufacturing credit 7.5% of eligible qualified production activities income.

Health savings account. If you have a high deductible insurance policy that qualifies, you can fund a HSA account for $3,400 single or $6,750 for a family policy. There is also a $1,000 catch up for those over 55.

Hiring family. If you have children or other family members that assist with the business, it is possible to shift the income to someone with a lower tax bracket. Remember the wages have to be reasonable given their age and work skills.

This is just a brief summary of what is available, majority of the items mentioned have specific requirements. The requirements can be complicated and may or may not fit your situation.

If you are paying too much in taxes – now is the best time to review your situation. 

Give us a call at 920-351-4842 to set up an tax planning appointment.   

By Mary Guldan-Lindstrom

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