Even if it doesn’t feel like it, the end of the year is right around the corner. For the small-business owner, that means it’s time to start thinking — and acting — seriously about deductions. No matter what kind of industry you’re in, it behooves you to reduce your tax burden and benefit your business and yourself as much as possible before the ball drops at midnight on December 31. Don’t just randomly buy a lifetime supply of paper goods for your office. Here are six tips that will help you ease your tax burden for 2015.
1. Donate Goods
Making tax-deductible donations in the form of physical goods to nonprofit organizations is a great way to relieve yourself of unnecessary items, while simultaneously doing good. Whether you have office furniture or appliances you’re no longer using, or you have large personal or business items of value such as a boat or car that could be donated, getting rid of unused items can offset your tax burden and de-clutter your work and life at the same time. Do a thorough inventory of what you have, and consider seriously whether or not you need it. If you don’t, let it be one of the ways you owe the government less money come tax time.
2. Get Energy Friendly
It’s not too late to update your office or warehouse with an energy-friendly system of some kind. Not only will you save on utilities by doing so, but in many instances, you’ll qualify for one of the many business energy investment tax credits that will expire next year. The tax credit makes it possible for business owners to save as much as 30 percent on the cost of installing solar, wind, fuel cell, and other technologies, or, if you’d prefer, to install combined heat and power, microturbines, or geothermal for a savings of 10 percent. You should be able to find plenty of free tax calcs online to help determine the deduction. There are other credits, too. If you reduce your energy use by 50 percent in a commercial space you rent or own, you’ll be eligible to deduct up to $1.80 per square foot of the entire space.
3. Up Your Retirement Fund
Regardless of what type of retirement plan you have in the works, if you have a 401(k) or an IRA, you can put the maximum amount of money allowed into each before April 15, which will keep those deposits from being taxed until you start to withdraw from those funds sometime in the future. Withdrawals can start as early as age 59 1/2 without penalty.
4. Consider the S Corporation
If you file Schedule C and have revenue that is greater than $500,000 and your business isn’t yet an S Corporation, consider becoming one. The S Corporation will allow you to pay yourself a reasonable wage via a W-2, while the rest of your revenue is then accounted for on your personal 1040 form, This setup allows the bulk of your income to avoid being subject to self-employment taxes — a considerable savings for a small-business owner making over $500,000.
5. Take All the Deductions You Can
A deduction not taken is money you’re needlessly paying the government. It’s absolutely essential that you keep track of and take all the deductions you’re allowed. From business meals to taxi rides when traveling for business, don’t let anything slip past you. Whether you employ a system of keeping track of paper receipts or a digital catchall is immaterial. Documentation is all you need, but it needs to be something you do every time. Work to develop a habit of recording your expenses as they happen instead of trying to recall them later. Even if you just snap a photo of a receipt with your smartphone, do it. Deductions really add up over the course of a year, making them one of the simplest ways to legally offset your tax burden come April 15.
6. Make the Most of Any Tax Credits
There are a number of tax credits still in effect that may apply to your small business. If you employ any veterans, you’re still eligible to claim the Work Opportunity Tax Credit for 2015. Likewise, the New Markets Tax Credit Program is still in effect. If you set up shop in a low-income community, as much as 39 percent of your startup investment costs can be claimed in tax credits over the course of seven years.
While there’s nothing you can do about the certainty of death and taxes, as a small-business owner, there’s no reason not to lessen the sting. Follow these six tips for easing your tax burden, and enjoy a smaller bill from Uncle Sam.