With the new year comes resolutions. Lose weight, go to the gym, spend more time with loved ones… we’ve heard those all before. But what about your taxes? Here are some quick tips to make your 2020 tax filing season a little better.
- Get Your Books in Order. Even for the most organized business owner, tax time can be stressful. Having clean books can alleviate some of this stress. One approach is to use a simple, free bookkeeping software like QuickBooks Online. You can link the online software directly to your bank account and categorize monthly expenses with minimal work.
- Home Office Deduction. Are you self-employed or a small business owner? If you work some of the time from home, you may be able to take the home office deduction for a portion of your home expenses (utilities, internet, rent, etc.). This valuable tax break could save thousands of dollars in taxes.
- Claim First-Year Bonus Depreciation. One of the positive changes from the Tax Cuts and Jobs Act (TCJA) is that you can now get a 100% first-year bonus depreciation for qualified used and new property that was acquired and placed in service during your 2019 business year. In other words, you may be able to get a tax break for the entire cost of assets purchased in 2019 rather than spreading out the costs over the life of the asset with regular depreciation. The same holds true for items purchased in 2020.
- Set up the Best Retirement Plan for Your Business. One of the best ways for small business owners to slash their taxes is to establish a great retirement plan. This could be anything from a SEP IRA to a Solo 401(k), up to the combination of 401(k) with a defined-benefit pension plan. For those needing huge tax savings, the defined-benefit pension plan is king. Combine it with a 401(k) profit-sharing plan and your business could put away a few hundred thousand dollars per year.
Minimizing your tax bill is one of the best ways to increase your small business’s net profitability. Be proactive and develop a strategy that will allow you to keep more of your hard earned money.