Here are more end-of-year tax planning strategies that might reduce your business tax liability:
Small business health care tax credit. Small business employers with 25 or fewer full-time-equivalent employees with average annual wages of $50,000 indexed for inflation (e.g., $53,200 in 2018) may qualify for a tax credit to help pay for employees’ health insurance. The credit is 50 percent (35 percent for non-profits).
Repair regulations. Where possible, end-of-year repairs and expenses should be deducted immediately, rather than capitalized and depreciated. Small businesses lacking applicable financial statements (AFS) are able to take advantage of de minimis safe harbor by electing to deduct smaller purchases ($2,500 or less per purchase or per invoice). Businesses with applicable financial statements are able to deduct $5,000. Small businesses with gross receipts of $10 million or less can also take advantage of safe harbor for repairs, maintenance, and improvements to eligible buildings. Please call if you would like more information on this topic.
Qualified business income deduction. Under the Tax Cuts and Jobs Act (non-corporations) may be entitled to a deduction of up to 20 percent of their qualified business income (QBI) from a qualified trade or business for tax years 2018 through 2025. To take advantage of the deduction, taxable income must be under $160,700 ($321,400 for joint returns).
The QBI is complex, and tax planning strategies can directly affect the amount of deduction, i.e., increase or reduce the dollar amount. As such it is especially important to speak with a tax professional before year’s end to determine the best way to maximize the deduction.
Retirement plans. Self-employed individuals who have not yet done so should set up self-employed retirement plans before the end of 2019. Call today if you need help setting up a retirement plan.
Dividend planning. Reduce accumulated corporate profits and earnings by issuing corporate dividends to shareholders.
Paid family and medical leave credit. Last chance to take advantage of the employer credit for paid family and medical leave, which expires at the end of 2019.
This discussion is offered for information only and should not be taken as advice. Taxes are complex so consider discussing your particular circumstances with your tax advisor.
Norm Grill, CPA, (N.Grill@GRILL1.com) is managing partner of Grill & Partners LLC, (GRILL1.com) certified public accountants and advisors to closely held companies and high-net-worth individuals, with offices in Fairfield and Darien, 203-254-3880.