Business tax planning can make an impactful difference to any company. Tax planning can help a business strategize to lower their amount of taxable income, and also help them reduce their tax rate. It can also help a company maximize tax relief and tax credits. Our Los Angeles and Rancho Cucamonga tax planning attorneys explain common types of tax planning strategies for businesses.
If you want to implement a tax planning strategy for your business, contact our Los Angeles tax planning attorneys today at (909) 766-9996!
Qualified Business Income Deduction
A new law passed in 2017 allows businesses to deduct 20 percent of business income. However, this is only available for businesses with specific titles, such as sole proprietorships, single-member LLCs, and S corporations. Companies that are C corporations won’t qualify for this deduction. There are also deduction limits based on the businesses’ income level and business type. It is best to speak to a tax attorney to determine if your business qualifies for this income deduction.
Timing Income & Expenses for Taxes
A common type of tax planning strategy is to be analytical with the timing of your income and expenses. For example, a business can slow income by delaying sending invoices from the fourth quarter to the first quarter, or they can make large purchases before year-end instead of waiting. As a result, taxes on that income won’t need to be paid until next year. If your business expects a higher income next year, you might want to make adjustments to get the income now and save on taxes next year.
Deduct Certain Property
The Section 179 property deduction can include up to $500,000 of eligible business property. You might be able to deduct the full amount during the year your business began using the property. This could be beneficial for businesses that have acquired a new location used for transportation, research, or more.
Deduct Charitable Contributions
If your business has made charitable donations, it’s a great tax planning strategy to include them in your taxes. These contributions can be a form of volunteer expenses and even stock.
Depreciation is another tax planning technique that is often used for businesses. To use this strategy, you need to record an asset’s loss in value as an expense. This can help your business reduce taxable income with the Tax Cut and Jobs Act of 2017. This act lets businesses depreciate 100 percent of qualified property (up to $1 million) the year it was acquired. The first-year bonus allows businesses to deduct income for the entire purchase price for only certain types of property, including computers, software, equipment, machinery, vehicles, and more. This depreciation is only available until 2023.
Investigate State Incentives & Credits
Every year, many states offer businesses incentives and credits to encourage economic growth—especially during the current health pandemic. An experienced tax planning attorney can help you determine if there are any tax incentives or credits available for you.
Rancho Cucamonga Tax Planning Attorneys
Failing to make the right tax planning strategies can result in penalties or tax audits. When creating a tax planning strategy for your business, it is important to have an experienced team on your side. Our Los Angeles tax planning attorneys help companies throughout Southern California anticipate and deal with tax issues before they become a serious problem. We can help you structure your businesses’ finances in a way that can lead to better results for your taxes. Get in touch with our team to discover how we can help your business.
Contact our Los Angeles tax planning attorneys today at (909) 766-9996 to schedule a free initial consultation with our attorney!