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The Top 4 Tax Strategies to Save Your Business Money

In: Business and Management

Submitted By panf
Words 632
Pages 3
Tax season can be daunting for everyone, but small businesses and entrepreneurs need to pay particular attention to the benefits and deductions available to them in order to reduce their tax liability. There are many different types of business structures and strategies for how a successful business should be run, but one thing is certain -- across the board -- everyone is looking for ways to save money!

Here are four tax strategies that can help any small business or entrepreneur save money:

1. Use your startup costs as a deduction.

Starting a new business can be really exciting, but it can also be time consuming and expensive. Fortunately, the IRS provides a tax break by allowing you to deduct up to $5,000 of your initial startup costs in your first year of business. This deduction allows you to reduce your taxable income, both for income tax and self-employment tax, which includes Social Security, and Medicare tax. Typical startup costs include things like purchasing equipment, supplies, and operational fees, but the rest of your startup costs should be depreciated over 15 years.

2. Use the special depreciation rules to take larger deductions.

When you purchase large items for your business -- items you expect to use for more than a year -- you generally cannot deduct the entire cost in that year. Instead you must depreciate the items and take a portion of the cost on your tax return each year. To get around this and deduct a larger amount in the year of purchase, you can use the special depreciation allowance. This allowance lets you take 50 percent of the cost of the item as a deduction in the year of purchase. This rule applies to almost all tangible property.

Additionally, you may also be able to take a 100 percent deduction of the cost of your business property purchased during the year using the Section 179 Deduction. This deduction can be…...

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