Tax Planning Tips for You and Your Business
It is October 15th and, hopefully, that means that your 2018 tax returns have been filed and you don’t have to worry about taxes again until next year, right? That may be the thought process for many tax payers, but it may be smart to consider what options are available to you before 2019 is up.
Last year saw a flurry of activity in the last week of the year, as many people tried to take deductions while they still could itemize. Limits placed on interest deductions and SALT deductions caused many tax payers to take the standard deduction. Business owners enjoyed the newly created business income deduction.
Planning for taxes, in many cases, can be complicated. You should have a trusted tax advisor to plan with. Here are some tips to consider before the end of the year:
- Depreciation – To reduce income taxes, a business owner may want to purchase and place new fixed assets in service by the end of the year. Under Section 179, entities can elect to expense up to $1 million of qualifying property, which includes HVAC equipment, fire protection or security systems. This break is phased out for qualifying purchases over $2.5 million. In addition, 100 percent bonus depreciation is still in play for 2019.
- Standard Deduction – For 2019, the standard deduction increased to $12,200 for individuals and $24,400 for joint filers. For many, with the limitation for SALT deductions, that means that itemizing is not beneficial, however, for some itemizing is still an option or itemizing one year and taking the standard the next. If you have significant medical bills, among other deductions, it may be smart to talk with your tax advisor about bunching your deductions into the tax year that you are going to itemize and then taking the standard deduction in the other year.
- Pay Taxes – If you currently pay estimates, now is a great time to review the books with your advisor and make any needed adjustments for the last estimate (due 1/15). If your business is taxed as an S-Corp and you pay yourself a salary, now is the time to review the numbers with an advisor to ensure you make the necessary adjustments to pay an appropriate amount of your taxes.
- Other Items – Individuals need to understand their capital loss carryforwards and investment portfolio. Should taxpayers offload underperforming stocks to generate a loss at the end of 2019 and offset gains? Could sales that generate gains be offset by loss carryforwards? Also, increasing the amount of money you put into retirement accounts is a way to save on taxes.
These are just a few examples and it is important that you have an advisor that you can trust and plan with. If you don’t have an advisor or have any questions, please reach out to us and we would be happy to help.