Ten Ways To Cut Your Tax Bill (Via Business Week)

Even if you are a start-up and made little this year, you can’t rely on low profit only to minimize your tax bill.  Business Week has 10 great tips that can help.

  1. Buy new stuff. If your business has less than $810,000 in depreciable property, Section 179 of the tax code now lets you deduct up to $250,000 (up from $125,000 last year) on purchases of new equipment. Then you can take bonus depreciation equal to 50% of the equipment’s value, all before regular depreciation kicks in. Just start using the new gear before year end. [external hard drives, laptops, printers are good ones to get now]
  2. Pay your reservists. Get credit for paying employees who have been called up by the reserves. The Heroes Earnings Assistance & Relief Tax Act of 2008 lets businesses with fewer than 50 employees get a tax credit when they pay reservists the difference between their civilian and military pay.
  3. Drive A Green American Car. Buy a hybrid car for your business and you’ll get a tax credit based on the vehicle’s fuel efficiency. The credit comes to $1,300 on the 2008 Chevy Malibu, or $3,000 for a Ford Escape or Mercury Mariner two-wheel drive.
  4. Maximize Your Mileage Deduction. [If you haven’t been keeping up, then you may not know the current maximum mileage.] On July 1, the IRS raised the standard mileage deduction rate to 58.5¢ a mile. The rate remains 50.5¢ per mile for driving during the first six months of 2008.
  5. Take Your Losses. [They reduce taxable income.] You probably know that investment losses in taxable accounts can be used to offset capital gains, but what if you have no gains? Use the losses to offset up to $3,000 in income. A $1,000 loss that offset $1,000 in capital gains will save you $150 at the 15% capital gains rate. But that same $1,000 can save you $350 if you’re in the 35% tax bracket and offset $1,000 in income.
  6. Fund Your Retirement Account. The best tax deduction is still a retirement account, partly because
    you don’t have to buy a thing to be entitled to it. This year, you can fund a defined contribution plan with up to $46,000 ($51,000 if you’re over 50 and qualify for a catch-up contribution).
  7. Become a Landlord. Because of the wonders of depreciation, commercial real estate is one of the few investments that can provide positive cash flow while reporting a loss for tax purposes, says CPA Michael Hanley, managing partner of Merl & Hanley in Smithtown, N.Y.
  8. Opt Out of Installment Sale. If you have sold a capital asset, such as land, this year, it might make sense to pay the taxes on the gain you receive all at once, even if you’re taking payments on an installment basis.
  9. Speed Up Expenses. If you normally restock your office supplies in January or February, or you have a business trip planned for early next year, try to do it now. The more expenses you book this year, the more you can write off.
  10. Clean Up Your Books and Get Ready For Next Year. If you’ve got inventory that’s collecting dust or clients who absolutely won’t pay, now’s the time to throw in the towel. Write off that dated inventory and stock up on goods that are moving faster.

2 thoughts on “Ten Ways To Cut Your Tax Bill (Via Business Week)

  1. When you find the vehicle of your choice whether it is new or pre-owned often you will need to find some sort of financing. This can be a real problem if you are not careful when it comes time to pay on your vehicle. The easier loans are obtained through your bank or credit union with you being the only signer on the loan agreement. This is a straightforward loan based on your credit score and handled professionally by a loan officer. Unfortunately, not all of us are able to get a loan this easy and must rely on other resources. The problem when we rely on the dealership we should make sure that we are getting a legitimate loan that we are held accountable for so our credit rating can improve.

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