Returning Value Blog

With the possibility that tax law changes could go into effect next year that would significantly reduce income tax rates for many businesses, 2017 may be an especially good year to accelerate deductible expenses. Why? Deductions save more tax when rates are higher.

The IRS goes to great lengths to categorize different types of income and treat them differently, and bonuses are another example of this. In the eyes of the IRS, bonuses are typically categorized as “supplemental wages.”

Some businesses can accelerate deductions for bonuses.

To put the early phase of building a startup business into context, consider dating. You remember that, right? Daters find each other through different avenues, get together, gauge their respective interest in one another, and then pursue a relationship or go their separate ways.

Projecting your business income and expenses for this year and next can allow you to time when you recognize income and incur deductible expenses to your tax advantage. Typically, it’s better to defer tax. This might end up being especially true this year, if tax reform legislation is signed into law.

When businesses provide meals to their employees, generally their deduction is limited to 50%. But there are exceptions. One is if the meal qualifies as a de minimis fringe benefit under the Internal Revenue Code.

With an employee stock ownership plan (ESOP), employee participants take part ownership of the business through a retirement savings arrangement. Meanwhile, the business and its existing owner(s) can benefit from some potential tax breaks, an extra-motivated workforce and potentially a smoother path for succession planning.

It’s common for a business to own not only typical business assets, such as equipment, inventory, and furnishings but also the building where the business operates — and possibly other real estates as well. There can, however, be negative consequences when a business’s real estate is included in its general corporate assets. By holding real estate in a separate entity, owners can save tax and enjoy other benefits, too.

If your employees incur work-related travel expenses, you can better attract and retain the best talent by reimbursing these expenses. But to secure tax-advantaged treatment for your business and your employees, it’s critical to comply with IRS rules.

Reap tax rewards for travel and entertainment

What are your plans for the summer? If you have a business trip scheduled for a place you would like to visit personally, you might decide to combine a little pleasure with your business. Similarly, you may invite some of your best clients to your home for a Memorial Day or Fourth of July barbecue or treat them to a night out on the town.

Section 179 provides generous tax break

There is a unique tax break for business entities of all shapes and sizes contained in Section 179 of the Internal Revenue Code. Under this section, a business can elect to “expense,” or currently deduct, the cost of qualified property placed in service during the year, up to a maximum level. It is near-instant tax gratification.