Tax planning for small business owners isn’t restricted to the end of the year. There is plenty you can do in the summer months to reduce your 2016 tax liability. Here are six moves to consider now.
Business Equipment
Thanks to recent legislation, the Section 179 deduction and bonus depreciation have both been restored. For 2016, a maximum Section 179 deduction of $500,000 and 50% bonus depreciation are generally available for qualified property placed in service anytime during the year. Be aware that special limits apply to vehicles.
Business Trips
When you travel on business this summer, you can write off your expenses – including airfare, lodging and 50% of the cost of meals – if the primary motive of the trip is business-related. Costs attributable to personal side trips are nondeductible. If you travel by car, deduct actual business-related auto costs or a flat rate of 54 cents per mile (plus tolls and parking fees).
Entertainment and Meals
Generally, you can deduct 50% of the cost of entertainment and meals that precede or follow a “substantial business discussion.” For example, you might treat a client to dinner and drinks after completing a contract earlier in the day. In this case, you can include 50% of the expenses for the client and yourself, as well as for spouses and significant others.
Company Outings
Generally, deductions for business entertainment and meals are limited to 50% of the cost. However, if you throw a company-wide picnic or barbecue in the summer, you could be able to deduct 100% of the cost when you meet certain requirements, such as inviting your entire staff.
Hiring your Child
Does your teenaged child need a summer job? If you hire your child, the wages paid for actual services rendered are deductible, the same as wages of other employees. The wages will be taxable to your child at your child’s tax rate, which may be lower than your rate
or that of your business.
Job Credits
When your business hires workers from certain “target groups,” such as veterans and food stamp recipients, you may be able to claim the Work Opportunity Tax Credit. The maximum credit is generally $2,400 per qualified worker. A special summertime credit is avail- able for hiring youths residing in empowerment zones or enterprise communities who work for you between May 1 and September 15.