Year-End Tax-Planning Moves for Businesses & Business Owners

By Andrew Rutherford and Marie Jett, CPA | Team Members of the Tax Services Group

Year-end tax planning could be especially productive this year because timely action could nail down a host of tax breaks that won’t be around next year unless Congress acts to extend them. For businesses, tax breaks that are available through the end of this year but won’t be around next year unless Congress acts include:

50% bonus first-year depreciation for most new machinery, equipment and software.

An extraordinarily high $500,000 expensing limitation.

The research tax credit.

The 15-year writeoff for qualified leasehold improvements, qualified restaurant buildings and improvements and qualified retail improvements.

Year-End Tax-Planning If Congress Does Not Act

Businesses should consider making expenditures that qualify for 50% bonus first year depreciation if bought and placed in service this year. Business planning to purchase new depreciable property this year or the next should try to accelerate their buying plans, if doing so makes sound business sense.

Businesses also should consider making expenditures that qualify for the business property expensing option. For tax years beginning in 2013, the expensing limit is $500,000 and the investment ceiling limit is $2,000,000. And a limited amount of expensing may be claimed for qualified real property. Unless Congress changes the rules, for tax years beginning in 2014, the dollar limit will drop to $25,000, the beginning-of-phaseout amount will drop to $200,000, and expensing won’t be available for qualified real property.

Make qualified research expenses before the end of 2013 to claim a research credit, which won’t be available for post-2013 expenditures unless Congress extends the credit.

Other Year-End Tax-Planning Moves

Secure a work opportunity tax credit (WOTC) by hiring qualifying workers (such as certain veterans) before the end of 2013. Under current law, the WOTC won’t be available for workers hired after this year.

If you are self-employed and haven’t done so yet, set up a self-employed retirement plan.

Depending on your particular situation, you may also want to consider deferring a debt-cancellation event until 2014, and disposing of a passive activity to allow you to deduct suspended losses.

If you own an interest in a partnership or S corporation you may need to increase your basis in the entity so you can deduct a loss from it for this year.

These are just some of the year-end steps that can be taken to save taxes. If you have any questions, feel free to contact Andrew and/or Marie.

Contact:
Andrew Rutherford | Team Member of the Tax Services Group
Telephone: 317-241-2999 | Email: arutherford@greenwaltcpas.com

Marie Jett, CPA | Manager, Team Member of the Tax Services Group
Telephone: 317-260-4472 | email: mjett@greenwaltcpas.com