Look Ahead, Plan Now
Author: Keith Huggett
With all of the changes in the tax code looming, taking full advantage of the relatively low rates and generous deductions that remain for 2012 is crucial. Here are a few tax tips that you should be acting on before the end of the year as a small business owner:
- Get your books organized: To be able to maximize your write-offs, it helps to know where you stand. Organizing your books now and sitting down with a tax expert can help you build a strategy for the rest of the year. It can also ensure that you are doing everything right, which reduces your risk of being audited.
- Make capital expenditures: This year, you can claim a Section 179 deduction and expense up to $139,000 in purchases of capital equipment. On Jan. 1, the deduction goes down to $25,000. In addition, this year's opportunity for a 50 percent bonus depreciation will also expire.
- Pay yourself a dividend: If your small business is a qualifying C or S corporation, you may be eligible for the 15 percent dividend tax through the end of the year. Next year, dividends will be taxed as regular income at rates as high as 39.6 percent if nothing changes. Regardless of what you pay yourself as a salary, this year is a good time to pull income out of your business.
- Shift small business income to this year: While you want to maximize your expenses, after you have done that, take as much income as you can this year. With the highest tax rates set to increase to 39.6 percent next year and self-employment taxes likely to go back up, 2012 will likely be a much better year to be paying taxes than 2013.
