Note: This article is not intended to replace the advice of a qualified tax adviser, attorney, or accountant.
The end of 2014 is near – it’s crunch time. Time to crunch the numbers, that is.
In the last two weeks of the year, it’s important for business owners to start thinking about the final things they can do to lower their taxes. Direct Capital has put together a list to help you organize those last minute tasks that can help you feel some tax relief in 2015.
How To: Lower Taxes for Your Small Business
- Buy or Lease Equipment: Want to start off the New Year with a POS system? More fitness equipment? New computers? There has never been a better time to buy. Section 179 is a tax law designed to help small businesses save money on their taxes. Here’s how it works: If it passes it will allow businesses to deduct the full purchase price (up to $25,000) of purchased or leased equipment from their gross income. If you haven’t hit the maximum limit yet of equipment you can purchase and then write off, we suggest you use the last two weeks to do so.
- Set Up and Fund Your Retirement Plan: As a small business owner, you have the distinct advantage of having a retirement account designed specifically for you. In addition to providing you with a retirement plan, they also provide huge tax benefits. There are a number of different plans you can choose from – solo 401(k)s, IRAs, SEP-IRAs, and more. Ask your tax advisor which option would be right for you. No matter which plan you choose, though, you can take a deduction for your contributions up until the tax return for the year is due.
- Donate to Charity: Donating to charity has its benefits. The most important is, of course, giving back to and helping your community. The other is being able to write off your charitable donations – whether it’s monetary or an object – as itemized deductions. You can view qualified 501(c)(3) organizations here.
- Open a Health Savings Account: As a small business owner, you are probably paying for your own health insurance. If that’s true, you should consider opening a Health Savings Account, or an HSA. You can deduct contributions to this account and then use the contributed money to pay almost any uninsured health expense.
- Determine Who Will Receive a Year-End Bonus: If you’re in the spirit of the holidays, you are probably presenting your employees with an end-of-year bonus. If your small business is run on an “accrual” process (counting the transaction at time of purchase, instead of when cash is received), then those bonuses are deductible within the first 2 months of the New Year. Handing out holiday bonuses is a win-win, as it will make your employees feel appreciated, and it can help you save a little bit of money during tax season.
These five tips are only meant to help get you and your small business started on a strong financial path for 2015. Before making any final decisions, we suggest consulting with a qualified tax adviser or attorney.
If you are looking for more small business tips, or for additional information on Direct Capital, please visit our website!