There are a couple of weeks left before the year ends, and small business owners should be thinking about ways to reduce their tax burden before year-end to maximize savings. That is why in this episode Mike is going to be discussing year-end tax strategies, such as bonus depreciation, credit card reimbursement, prepaying expenses, and buying equipment for your business, among other things.
[00:00] What Do I Need to Prepare for Tax Savings at Year-End
• The IRS safe harbor rule allows cash basis taxpayers to prepay and deduct qualifying expenses up to 12 months in advance.
• This includes business insurance premiums but basically you can prepay up to 12 months in advance and get the deduction here in the year that you make the payment.
• Not billing customers, clients or patients temporarily can shift income from this year into a future year.
[04:23] Strategies to Save on Taxes
• Buying equipment or vehicles now can potentially save money in taxes in the future but remember only buy things that your business really needs and will use.
• Bonus depreciation is still at 100% in 2022, but it will be reduced each year after that.
[08:37] Don't Overthink Making Deductions
• Mike shares on why you can deduct the full $100,000 in 2022 using a 100% bonus depreciation. And if you wait until 2023, you're only gonna be able to deduct $80,000 or 80% in bonus depreciation in year one.
• He also discusses if you should rush out and purchase business property before 2022 ends to take advantage of that 100% bonus depreciation and why is not necessarily the case.
[12:46] Prepaying Expenses for a Tax Deduction
• If your business expenses exceed your income, you have a loss for the year. This is called a net operating loss and can be carried forward.
• You should never stop documenting your deductions and claiming what is rightfully yours.
• Prepaying expenses can help you move income from one year to another, and can also create a tax loss in the year you prepay them.
[16:45] A Recap of Tax-Saving Strategies
• Try to always your credit cards in most cases.
• Don't assume you're taking too many deductions.
• If you are not operating at a loss, don't be afraid that loss is gonna carry forward an offset future income.
• Don't stop taking deductions that are valid legal and available to you simply because you don't want to go to a loss.
[18:09] Closing Segment
• Final words
Key Quotes
“Do not assume you are taking too many deductions. The IRS code was written the way it was for a reason, so that you as a business owner can take advantage of it”. – Mike Jesowshek
Resources Mentioned
Blog Posts:
· https://www.taxsavingspodcast.com/blog/what-year-end-tax-strategies-are-available-to-business-owners
· https://www.taxsavingspodcast.com/blog/what-do-i-need-to-prepare-for-tax-savings-at-year-end
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