Don’t miss out on these 6 tax breaks for your business
Although the year is quickly coming to a close, there may still be time to save on your 2014 business tax bill. Talk to your tax advisor about the following:
- Equipment purchases. Under Section 179 expensing, you can deduct the entire cost of qualified new or used equipment or software purchased or leased and put into service in 2014, up to a maximum of $25,000. In previous years, economic stimulus initiatives raised the 179 expense limit to as high as $500,000, but it has been restored to the original $25,000 limit for 2014. You may want to run the numbers with your accountant to see if depreciating equipment over multiple years is more advantageous for your organization.
- Charitable donations. You may be able to take a charitable tax deduction if you donate cash or supplies to a qualified charity by year-end. This could be a good use of excess inventory. Be sure to keep receipts.
- Retirement plans. Employer contributions to qualifying retirement plans for employees are deductible. You may also be able to take a credit of 50 percent of the start-up costs of the plan, up to a maximum of $500. Read more about the tax benefits of retirement plans.
- Health insurance. If you have fewer than 25 full-time-equivalent employees making an average of less than $50,000 a year and pay at least 50 percent of the cost of their health insurance, you may be able to deduct up to 50 percent of the cost of premiums paid. Learn more about the small business health care tax credit.
- Other insurance costs. Many business insurance costs may be deductible, including premiums for liability; malpractice; losses from fire, theft, storms or accidents; and credit insurance. Consult the full list.
- Home office deduction. If you use your home for business, you may be able to deduct home business expenses—such as rent, mortgage payments, utilities and insurance—based on the percentage of the square footage of the home used for business. If you prefer a less-complicated approach, the simplified method lets you multiply the qualified area of your home used for business by $5, subject to certain limits. See the IRS Publication 587, Business Use of Your Home.
For a full list of deductible business expenses, download Publication 535, Business Expenses.
California tax credits
In additional to federal tax breaks, you may be able to take advantage of California tax credits for businesses. Although it may be too late to qualify for the 2014 tax year, it’s not too early to start planning for next year. Learn more about potential tax credits from the State of California Franchise Tax Board.
Be prepared for last-minute changes
As it did last year, Congress may pass some to-the-wire tax legislation before year-end (or even retroactively in January). Be sure to check with your tax advisor regarding any changes that could affect your business.