Small Business Year End Tax Planning

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Defer Corporate Income and Accelerate Deductible Expenditures If your business operates as a regular C corporation, you should plan to deductible expenditures into this year.

Looking for easy ways to defer income and accelerate deductible expenditures?

(Used assets don’t qualify.) This break is available for the cost of new computer systems, purchased software, machinery and equipment, and office furniture.

Additionally, 50% bonus depreciation can be claimed for qualified improvement property, which means any qualified improvement to the interior portion of a nonresidential building if the improvement is placed in service after the date the building was first placed in service.

That represents a whopping 75.4% of the vehicle’s total cost.

In contrast, if you spend the same ,000 on a new sedan that you use 100% for business between now and year end, your 2016 depreciation write-off will be only ,160.But these vehicles can be useful if you need to haul people, equipment and other things around as part of your day-to-day business operations. Under the Section 179 election, you can elect to immediately write off up to ,000 of the cost of a new or used heavy SUV that’s: 1) placed in service by the end of your business tax year that begins in 2016, and 2) used over 50% for business during that year.If the vehicle is new, 50% first-year bonus depreciation allows you to write off half of the remaining business-use portion of the cost of a heavy SUV, pickup or van that’s: 1) placed in service in calendar year 2016, and 2) used over 50% for business during the year.On your 2016 business tax return or form, you can elect to write off ,000 under Sec. Then you can use the 50% first-year bonus depreciation break to write off another ,000 (half the remaining cost of ,000 after subtracting the ,000 Sec. Finally, you can follow the regular depreciation rules to depreciate the remaining cost of ,000. 179 deduction and the 50% bonus depreciation deduction.) For this asset, regular depreciation will generally result in a ,000 deduction (20% x ,000) in the first year.When all is said and done, your first-year depreciation write-offs amount to ,000 (,000 ,000 ,000).However, qualified improvement costs don’t include expenditures for the enlargement of a building, any elevator or escalator, or the internal structural framework of a building.Important note: Under the current rules, 50% bonus depreciation will also be available for qualified assets that are placed in service in 2017.It’s not too late to take steps to significantly reduce your 2016 business income tax bill and lay the groundwork for tax savings in future years.Here’s a summary of some of the most effective year-end tax-saving moves for small businesses under the existing Internal Revenue Code.If the new Congress reduces individual federal income tax rate brackets for 2017 you should consider aggressive tax planning in 2016 to create permanent tax benefits.Under that assumption, the traditional strategy of deferring income into next year while accelerating deductible expenditures into this year can create a significant tax benefit.

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