November 16, 2017 | Posted in:

Small Business Tax Planning Tips

As a follow up to end-of-year individual tax planning tips, Associate Partner Rich Middleton, CPA offers 12 considerations for small businesses when it comes to business tax planning.


Better late than never.  If you haven’t given much time or thought to tax planning for 2017, now is a good time to start.  Here are some ideas and strategies to consider:


Retirement Contributions

  1. If you don’t have a plan in place, set one up. Some plans can be set up by the extended date of the business’ tax return.  If you already have a plan in place, be sure to defer the maximum amount the plan allows and fund any discretionary or required match.
  2. There are four basic types of retirement plans that are available for the small business owner. These include the Simplified Employee Pension Plan (SEP IRA), the Savings Incentive Match Plan for Employees (Simple IRA), the Self-Employed 401(k) Plan and the 401(k) plan.  Characteristics differ for each plan so it’s a good idea to discuss your situation and needs with your tax adviser to determine the best plan for you.


Fixed Asset Purchases and Depreciation

  1. Section 179 depreciation. Qualifying property such as machinery and equipment, furniture and fixtures, certain real property improvements and yes, off the shelf computer software are eligible for IRS Section 179 treatment.  Section 179 allows your business to write off up to $500,000 of the full cost of qualifying property in the year of acquisition.  The Section 179 deduction is available in full on purchases up to $2.3 million and is subject to income limitations.  Special rules may limit a deduction for vehicle purchases.
  2. Bonus depreciation. This allows your business to write off 50% of the cost of qualifying property in the year of acquisition.  The 50% rate will gradually phase out and expire after December 31, 2019.
  3. If your business is considering fixed asset acquisitions, it may make sense to purchase and place in service before the end of the year. Suppose you buy a $1 million piece of equipment for your business and assume you fall within the purchase and income limitations.  After taking the maximum Section 179 deduction, bonus depreciation and regular depreciation, you will write off approximately $800,000 of the purchase price in the first year.   The tax savings are significant.


Income and expenses

  1. Defer income whenever possible. Hold off on billing invoices until the beginning of the next year.
  2. Accelerate expenses into the current year. For a cash basis business, prepay expenses such as employee bonuses, office or business supplies, rent, insurance and professional fees.
  3. If you work at home, consider the home office deduction.
  4. Flow-through entities such as partnerships and “S” Corporations that anticipate a loss for the year should review partner or shareholder basis to ensure the deductibility of the loss passed through to the individual.
  5. Keep track of business miles, total miles and actual expenses related to the use of a car to substantiate any auto expense deduction.
  6. Flow through entities should coordinate tax planning at the entity level with planning at the individual level


The Tax Advisor

  1. Meet with your accountant well before year end. Make time to review the past year, discuss tax and profit planning and put those strategies in place before time runs out.  January 1st may be too late to resolve pitfalls.


A final note regards the current status of tax reform.  Legislation is in flux and may have a major effect on some of the strategies outlined above.  Fortunately, you have until year end to make your moves; hopefully the administration will have some semblance of their package in place before then.


Contact us for guidance with your business tax planning situation →



Associate Partner
Rich provides tax, accounting, and auditing services to a broad range of clients, with a specialty in real estate, manufacturing, wholesale, financial services, and other various service industries.
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