Small business owners are constantly told that “it’s not what you make, it’s what you get to keep”. Especially this time of year, working with your tax accountant to find special federal tax breaks is another part of your job. Here are 7 tax breaks scheduled to end by Dec. 31 and how they can still be used:
1. Hire the “right” employees. There is still a work opportunity tax credit for companies that hire people on welfare, veterans, ex-cons and other groups. The federal government wants to encourage small businesses to hire groups of people that typically have a more difficult time getting a job. A maximum of $2,400 comes back in credits from their first year wages. If you were going to hire in the first quarter of 2012, you may want to hire this year.
2. Deduction for state and local sales taxes. You can still deduct what your business pays to the other taxing authorities. If you personally make between $50K and $100K a year, this can be worth $250 to $500 off your federal return.
3. More home deductions. Your home mortgage insurance can be deductible as home mortgage interest as long as the contract was issued after 2006.
4. Fix up your company. Fifteen year straight-line deduction for leasehold improvements are in effect through year end in order to deduct it faster from your taxes as an expense. This reduces profit and your company's tax liability. You may want to get a head start on depreciation by making the leasehold improvements this year.
5. Deduct your college student. This is an above the line deduction and includes tuition and all related expenses. Added bonus: No need to itemize for this deduction unless they are being used as a business expense. However, there are adjusted gross income limits in order to qualify for this deduction.
6. Donate it. There is an enhanced deduction if your company donates computer equipment for educational purposes. This rule allows a deduction on a higher than cost basis. Take an inventory of what equipment your company no longer needs and seek to donate it to an educational organization. You can also make tax free distributions from your IRA if you just want to give it all to charity. However, you must be over 70 years old and the limit is $100K per year.
7. Commuting. You and your employees will not be able to use pretax money to buy the mass transit passes the same way next year. This exclusion for employer provided mass transit and parking benefits is scheduled to be phased out. This is currently worth up to $240 and may only be worth 50% of this in 2012.
If your business owns electric motorcycles, three wheeled vehicles, new energy efficient appliances, mining safety equipment or motor sports entertainment complexes, your federal government has some special deductions just for you. Talk to your tax accountant for industry and company specific rules that may benefit your particular company.
All of these are set to expire December 31, but of course the federal government could renew them at any time.
Are there any special tax deductions your company is taking advantage of this year?