Practical Year-End Tax Ideas for Businesses and Self Employed

Posted by Jack Craven on Sun , Dec 01 , 2013

If you are self employed, a start up media entrepreneur or a business owner of any sort, it’s not too late to make moves to reduce your 2013 income and self employment taxes. Here are a couple ideas:#Business tax planning

  • Purchase business equipment. Up to $500,000 (scheduled to be reduced significantly to $25,000 in 2014) in business equipment purchases can be expensed this year, rather than being expensed over a number of years. Additionally, there is also a 50% bonus depreciation allowance (that will not be available in 2014) if your purchases exceed the $500,000 limit,  2013 might be the last year to maximize your equipment purchase deductions to such an extent.This is great benefit to a media or any company with profits that can be offset or reduced.
  • Deduct health insurance. If you are self-employed, you are allowed to claim 100% of the amount paid for health insurance for yourself, your spouse, and your dependents as long as you follow certain conditions.
  • Consider credit card purchases. If you want to purchase equipment or supplies for your business before the end of the year, but you are cash-strapped, consider using your credit card. Your deduction occurs this year when the purchase is made, not next year when the credit card charges are paid. Many startups finance themselves through credit card purchases. Beware, this can add a level of risk to your startup.
  • 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 administer, such as a Simplified Employee Pension (SEP) plan. A 401(k) plan could be established even for a one-person business. While some of these plans must be established by the end of the year, most can be funded up to the extended due date of the tax return.
  • Use the new “streamlined” home-office rules. Ocassionally, self-employed taxpayers declined to claim the home-office deduction because it was so complicated to compute. For 2013, the deduction is streamlined, allowing for a deduction of $5 per square foot, up to a maximum of 300 square feet or $1,500. This is last on my list because $5 per square foot, although simple to understand,  is just a fraction of the cost per square foot in NYC and surrounding areas. 

For guidance with year-end tax planning for your business, please contact our office.(212-605-0276). 

IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with Treasury Department regulations, we inform you that any U.S. federal tax advice contained is not intended or written to be used, and cannot be used for the purpose of (i) avoiding penalties that may be imposed under the U.S. Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.