There
are a number of end of year tax strategies businesses can use to reduce their
tax burden for 2013. Here's the lowdown on some of the best options.
Purchase New Business Equipment
Section 179 Expensing. Business should take advantage of Section 179
expensing this year for a couple of reasons. First, is that in 2013 businesses
can elect to expense (deduct immediately) the entire cost of most new equipment
up to a maximum of $500,000 for the first $2,000,000 of property placed in
service by December 31, 2013. In 2014, the $2,000,000 cap is reduced to
$200,000 and the $500,000 deduction limit is reduced to $25,000.
Also
in 2013, businesses can take advantage of an accelerated first year bonus
depreciation of 50% of the purchase price of new equipment and software placed
in service by December 31, 2013 that exceeds the threshold amount of
$2,000,000. This bonus depreciation is phased out in 2014.
Qualified
property is defined as property that you placed in service during the tax year
and used predominantly (more than 50 percent) in your trade or business.
Property that is placed in service and then disposed of in that same tax year
does not qualify, nor does property converted to personal use in the same tax
year it is acquired.
Note: Many states have not matched these amounts and, therefore, state
tax may not allow for the maximum federal deduction. In this case, two sets of
depreciation records will be needed to track the federal and state tax impact.
Other Year-End Moves To Take Advantage Of
Partnership or S-Corporation Basis. Partners or S
corporation shareholders in entities that have a loss for 2013 can deduct that
loss only up to their basis in the entity. However, they can take steps to
increase their basis to allow a larger deduction. Basis in the entity can be
increased by lending the entity money or making a capital contribution by the
end of the entity's tax year.
Caution: Remember that by increasing basis, you're putting more of your
funds at risk. Consider whether the loss signals further troubles ahead.
Retirement Plans. Self-employed individuals who have not yet done
so should set up self-employed retirement plans before the end of 2013. Call us
today if you need help setting up a retirement plan.
Barry Eisenberg, SCORE Counselor, email: barrye003@aol.com
No comments:
Post a Comment