New Year is not only about popping the champagne cork with your family and friends. You must also invest some time for the year-end tax planning. In fact, you can conveniently handle this situation with some prior planning and smart moves. This is specially applicable for the small business owners. There are many tax consultants who can help you to save on your tax. You can also follow certain tax saving strategies. For example if you have just bought some heavy engineering machinery or some software for your business , you are entitled to get 50% first-year bonus depreciation. However, this is applicable only for new and unused equipments. Such depreciations can also be claimed for new real estate land renovations. But before making this sort of claims it is better to consult a tax professional as a number of real estate costs will not qualify for this bonus.
Deferring your income for a few days is also good way to save your tax. If you have a payment due in the last week of December, try to receive it in the first week of January. This payment will not be taxable until next year. This deferral strategy often depends on the legal structure of your business as well as on your overall turnover. Also make sure that you have enough cash flow to sustain any kind of deferred income. Simultaneously, pay your other bills early. For example, the tax that you pay for your property is deductible. Likewise, you can also get rebate on your insurance premiums and medical expenses.
Boosting your business expenses will enable you to cut your dues as well. This may include buying fax paper and office supplies as well as paying bonuses to your employees. Establishing retirement plans is also considered as a tax-deductible contribution. Moreover, such plans not only reduce your liability, they help you to save for the future. To avail this benefit you must get all your paperwork done before 31st December. Though you can delay the employer contribution until filing your return, the employee contribution must be paid before the year ends. Those who are involved in charities can make their donations early and submit the receipt for deductions.
It is better not to buy mutual funds until after their ex-dividend date. This way, there is no need to pay for the capital gains tax. Likewise you can sell off your losing investments so as to get a deduction. Investing in government policies will also help you to get such deductions.
While planning your year-end tax strategy make sure that you have every update about your company’s accounting details. This will help you to understand the present financial situation. Your books must be accurate and up-to-date. There are several accounting software that will help you to record the income and expenses properly. Such reports can also provide a summery of your tax deduction report, which will help you to make smart decisions.