Year-end Tax Planning Tips for Businesses
Although “all year long” is the right time to ensure you are planning for your company’s tax liabilities or savings, most companies look to the end of the calendar year for most of the planning.
Why? It’s the time of the year when Congress issues year-end tax extenders, and many companies have a bit more time on their hands to address operational issues due to slowing down at the holidays.
While this is not a comprehensive list of year-end planning tips for businesses, it’s intended to be a conversation starter. Certum Solutions can discuss any of these tips with you in detail and help ensure your books are current for tax planning purposes.
Purchasing Assets for Your Company
We published a blog in spring 2023 about the de minimus rule for fixed assets, but here’s a recap. The best advice we hear on this topic is not to go out and buy a dozen computers, monitors or other equipment just because you could get a tax break. Buy only what you need, but keep the following in mind.
You should consider purchasing certain items before the end of 2023, especially depreciable property that falls under Section 179 business property expensing. This includes computer software to HVAC systems—and even security systems. Beginning in 2023, the Section 179 expensing limit is $1,160,000 and the investment ceiling limit is $2,890,000. And if machinery and equipment were purchased and placed in service this year, businesses can also claim an 80% first-year depreciation deduction.
Review Your Company’s Retirement Plan
As more and more businesses know all too well about the war on talent, offering your employees a solid set of benefits and perks will go a long way to help keep them for the long term. That includes your retirement plan.
According to Business News Daily, small businesses have access to specially qualified retirement plans outside of the typical 401(k) or IRA. For example, SEP plans can help employees put away up to 25% of their income up to $54,000.
If you need help finding an investment advisor to assist you with these kinds of plans, reach out to us and we can help locate a reputable company for you.
Cash-based businesses can defer income until 2024
With some accounting tactics, you can increase expenses while deferring income. For example, you can defer a check for payment to your business until 2024. And you can do the same with expenses; if you write a check in 2023 and it’s not cashed until 2024, you still realize the expenses in 2023. A lot of companies, for example, write a check for their rent on Dec. 31, but the check isn’t cashed until 2024. This isn’t “creative accounting;” it’s a perfectly legal thing to do.
Write a check to charity in 2023
Yes, of course you can support your company’s favorite causes throughout the year, but you can also realize year-end tax savings by contributing to your favorite charity. And don’t forget “in-kind” contributions. Lots of companies have clothing and food drives for local nonprofits. You could even ask your employees to come up with their own favorite charity as part of a holiday service project.
Wrap up 2023 With Tax Planning
These are only a few of the ways companies can plan for the future, especially when it comes to their taxes. If you want more ideas or just want to chat about any of these, please contact us today and we’ll help you out.