There is still time to consider tax moves that could reduce your business taxes for 2013.
Create a Retirement Plan
It’s not too late to create a retirement plan for yourself and your employees if you have them. The plans can be simple to set up and maintain, such as a Simplified Employee Pension (SEP) plan. A 401(k) plan could be established even for a one-person business.
Some plans must be established before the end of the business year. But consider that in many cases you can deduct a pension contribution in 2013, and postpone putting the money into the plan until the extended due date of the business tax return, which is typically 9 or 10 months after the business year end.
Purchase Business Equipment
Up to $500,000 in equipment purchases can be expensed in 2013, rather than being depreciated over a number of years. The $500,000 limit is scheduled to be reduce significantly in 2014, to just $25,000.
If your purchases exceed the $500,000 limit, you could also take advantage of a 50% bonus depreciation allowance in 2013. With a few exceptions, bonus depreciation is scheduled to disappear in 2014.
Consider Credit Card Purchases
If you want to purchase equipment or supplies before year-end, but you are cash-strapped, consider using your credit card. Your deduction occurs when the purchase is made, not when the charges are paid.
Use the New “Streamlined” Home-office Rules
The IRS has given us a new method to report the deduction for home office, allowing a standard expense of $5 per square foot of dedicated office space. This standard expense is capped at 300 square feet, or $1,500. If your typical home office deduction is greater than this amount, it may be more beneficial to continue reporting the detail of your expenses in order to get the larger deduction.
Keep in mind that this new method of calculating the deduction does not change the rules for allowing a home office, it merely streamlines the method of reporting the expense.
Contact your tax professional for more guidance on these and other tax savings opportunities.
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