Ryan Case, Senior Vice President, Business Banking, KeyBank
By Ryan Case, Senior Vice President, Business Banking, KeyBank
For the first time in years, taxpayers don’t have to wait for congressional action on late-year extenders. A number of the traditional tax extender provisions have either been made permanent or been extended through the end of 2016 under the Protecting Americans from Tax Hikes (PATH) Act of 2015. While this certainly makes year-end tax planning for 2016 a little easier, the election year clouds the future—making “now” a good time for business owners to take advantage of opportunities to reduce their tax burden.
If you are a business owner, a number of planning strategies are available that can help you minimize taxes and retain or transfer your wealth more efficiently. Early planning ensures that you can take advantage them. So as the year comes to a close, here are seven ideas to consider.
These are just a few options that may be available to you to help with your year-end tax planning. For more options, schedule an appointment with your financial advisor and tax professional.
Ryan Case is a senior vice president at KeyBank and leads the Capital Region’s Business Banking team. He may be reached at either 518-375-3044 or firstname.lastname@example.org. This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice.
Overlooked tax deductions for your small business
A variety of tax planning strategies area available to your small business as mentioned above, but don’t forget the various business deductions that you may qualify for when it comes time to file your 2016 business tax return. The following deductions can help you save come tax time:
Startup costs. These expenses are incurred before you open for business. If you are a new company, it is important to understand your startup costs—what you can and can’t claim for 2016.
Of course, you want to maximize your deductions, but doing it right the first time will save you in the long run. This may mean spreading out deductions over time.
Mileage and travel expenses. If traveling to meet with clients is part of your job, don’t forget to claim your mileage. There are two methods for doing this: standard and actual. The standard method for calculating mileage in 2016 is 54 cents per business mile (down from 57.5 cents per business mile in 2015) plus tolls and parking.
The actual method is to add up all automobile expenses—including gas, repairs, oil change, car insurance and car washes—and then multiply it by your business percentage, which is determined by dividing your business miles by total miles for the year.
Depreciation deduction. Consult with your tax advisor on newly purchased office furniture, property, and equipment for your business. You can depreciate these assets over time. You may even qualify for a full write-off using the section 179 depreciation deduction. This allows you to deduct the entire amount of the purchase instead of increments of annual depreciation each year.
Insurance premiums. You can deduct all premiums that you pay for your business owner’s policy, liability, malpractice, workers’ compensation insurance and others.
Health insurance deductions or credits. If you are self-employed you may be eligible to deduct your health and dental insurance premiums as a personal expense on your 1040 (not as a business expense).
If you are a small business employer you are eligible for the small business health care credit if you employ fewer than 25 full-time equivalent employees; the average annual wages of your employees are less than $52,000; and you pay a uniform percentage for all employees that is equal to at least 50 percent of the premium cost of employee-only insurance coverage.
Also, don’t forget the Affordable Care Act. Small businesses need to make sure they are adhering to and complying with the ACA to avoid fines.