Year-End Tips to Lower Your Business Taxes

Timing is everything – especially in business. Once the calendar flips to December, it’s time to strategize any end-of-the-year opportunities that can lower your taxes. In fact, there are several ways to reduce your taxable income by being strategic about your business expenditures.

Donations

If you itemize your deductions, lower your income taxes by donating money, property or both to a qualified 501(c)(3) charity by the end of the year, and take a deduction. Help others and help yourself at the same time. Visit IRS.gov for a list of qualified charities. 

Investment

The self-employed are allowed to set up retirement accounts specifically designed for small business owners such as solo 401(k)s, IRAs, SEP-IRAs, Simple IRAs, and Keogh plans. These accounts provide enormous tax benefits while building in value for the future. Visit IRS.gov for annual contribution limits.

Marketing

Media companies are anxious to add to their books before the end of the year, which is good news for you. Negotiate favorable rates for an agreement that runs next year, or negotiate for a last-minute opportunity this year. Make sure you pay for it by Dec. 31. You can also run some social media ads to reduce your tax income while promoting your company, product or services at the same time.

Gifts/Bonuses/Parties

The end of a year is a traditional time to award bonuses to employees, give gifts to employees or clients and/or host a holiday party. Not only will you receive a tax deduction for these expenses, but you will also build goodwill from your employees and clients. Bonuses to employees of all types of companies are deductible business expenses. Holiday gifts and holiday parties may be deductible, as long as they are not routinely given and are for the purpose of promoting goodwill.

Delay Billing

If you can delay billing for work done late in the year so that payment will be received in the following year, you will delay the tax hit for 12 months. If you are self-employed or do freelance or consulting work, you have more flexibility. Just make sure the delayed cash flow won’t hurt you.

Stock Up

This isn’t a sexy suggestion, but take a look at your office supplies and stock up on what you need before the year ends. Toner or ink, anyone? With the many holiday sales going on, you’re going to get more bang for your buck if you shop now.

Fixed Assets

The holiday season also provides opportunities to save on higher priced items that you use for business such as a phone, computer, software, etc., which you can deduct if you buy it by the end of the year. Higher priced items like machinery and equipment can also be fully deducted all at once instead of depreciating over time, but consult your CPA on the best strategy. 

Remember, these suggestions are just for general information only. Consult your CPA, tax attorney, or enrolled agent for more information relating to your specific situation.