Our friends at Insight Accounting Group recently provided a list of ways to reduce your 2016 tax liability. Following are a few of their suggestions that we think you’ll find timely. As always, be sure to check with your own tax adviser.
Business equipment: This year the Section 179 expense deduction maxes out at $500,000 – and this includes software purchases as well, we might add. That’s the amount of expense that can be fully written off this year. There is a 50% bonus depreciation for qualified property placed in service anytime during 2016. Special limits apply to vehicles.
Business trips: If you’re traveling to wrap up year-end business deals, you can write off expenses including airfare, lodging and 50% of meal costs if the primary motive (note, not the exclusive motive) is business-related. Costs attributable to personal side trips are nondeductible. And by the way, the current IRS allowance for mileage related auto costs is a flat 54 cents per mile, plus tolls, parking and fees.
Entertainment and meals: You can deduct half the cost of entertainment and meals associated with a “substantial business discussion.” Except…
Company outings: If you throw a company-wide holiday party before year-end, you may be able to deduct up to 100% of the cost if you meet certain requirements, such as inviting your entire staff.
Hire your child: If you hire your child, say over the holidays, reasonable wages paid for actual services rendered are deductible, just like for other employees. They’ll be taxable at your child’s tax rate, too, which may be lower than that of you or your business.
Job credits: If you hire workers from certain targeted groups including veterans and food stamp recipients, you may be able to claim the Work Opportunity Tax Credit, which is limited to $2,400 per qualified worker.
The tax code is huge and complicated as we all know, but wise business owners know to take advantage of the legal and ethical loopholes provided. The handful above are ones you want to be sure to know about.