Dear Friends of Our Firm,
Despite conventional wisdom, year-end planning isn’t just for personal tax savings. There’s plenty a small business owner or manager can do between now and Dec. 31 to cut taxes in 2008. Plus new legislation may give a boost to year-end tax planning for your business. Consider the following points:
• Under the Section 179 “expensing” deduction, a business can write off the full cost of certain business assets, up to a dollar cap. For 2008, the maximum deduction limit has been increased to $250,000. (It was scheduled to be $128,000.)
• Take advantage of bonus depreciation. For qualified assets placed in service in 2008, you may claim an extra 50% deduction in addition to available Section 179 and regular depreciation deductions.
• Increase your business driving or decrease personal driving—or both—to preserve top deductions for personally owned vehicles. In lieu of deducting actual expenses, you might use the standard mileage rate for 2008. The rate is 50.5 cents per mile (plus related tolls and parking fees) for the first six months of the year; 58.5 per mile for the last six months.
• If your company operates on the accrual basis, fix bonus amounts before Jan. 1, but pay them early next year. Generally, the bonuses aren’t taxable to employees until 2009, but can be deducted on your company’s 2008 return so long as they’re paid by March 16, 2009.
• Nail down current deductions for repairs to business premises by scheduling them separate and apart from major renovations. As opposed to repairs, capital improvements aren’t deductible, but are instead added to the “basis” of property.
• Keep detailed records of collection efforts to support deductions for bad debts that became worthless in 2008.
• Reschedule business trips planned for early next year to December to increase travel deductions for 2008.
Obviously, this is only a quick summary of several popular tax techniques. Give us a call at (618) 542-9127 for more in-depth information about year-end planning for your business.
P.S. The best year-end strategies will result from a well-designed plan that is tailored to the specific needs of your business. Don’t hesitate to call us at (618) 542-9127 to schedule a meeting.
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