Now that 2014 has closed, it’s time to focus on your small business tax return for the year. Tax strategies, old and new, can help cut your tax bill. Here are five tax tips to help you.
1. Claim your full write-offs
Tax limits, thresholds, and ceilings change from year to year, so don’t assume that deduction limits or tax rules from prior years apply now. Failing to learn what’s new could result in your shortchanging yourself. For example, there is an increased tax credit for paying at least half the cost of health coverage for employees…but check eligibility rules.
2. Make decisions about writing off equipment purchases
For 2014, there are three possible ways to deduct the cost of equipment (such as smartphones and tablets) and machinery:
- Regular depreciation, which spreads deductions for the cost over 5, 7, or other periods fixed by law for the type of property you buy.
- Bonus depreciation, which allows 50% to be deducted immediately.
- First-year (Section 179) deduction, which limits the first-year write off to $500,000; it can be combined with regular and bonus depreciations for an even greater deduction in 2014.
The deduction rules vary with each option. For example:
- A bonus depreciation applies only to new property (not to pre-owned items);
- It applies automatically, but can be waived.
- First-year expensing is only beneficial if you are profitable
- If desired, it must be elected.
Work with a tax advisor to review not just your 2014 tax picture, but look ahead to determine which write-off is best for your situation.