You still have time to significantly reduce this year’s business income tax bill. Here are seven yearend moves to consider. But you’ll need to act fast.
3. Write off new heavy SUV, pickup, or van The 100% bonus depreciation provision can have a hugely beneficial impact on first-year depreciation deductions for new and used heavy vehicles used over 50% for business. That’s because heavy SUVs, pickups, and vans are treated for federal income tax purposes as transportation equipment. In turn, that means they qualify for 100% bonus depreciation.
* The TCJA expanded the definition of real property eligible for the Section 179 deduction to include expenditures for roofs, HVAC equipment, fire protection and alarm systems, and security systems for nonresidential real property. To qualify, these items must be placed in service after the nonresidential building was placed in service.
On the other hand, if you expect to be in a higher tax bracket in 2021, because you hope and trust that it will be a much better year, take the opposite approach. Accelerate income into this year and postpone deductible expenditures until 2021. That way, more income will be taxed at this year’s lower rate instead of next year’s higher rate.
The QBI deduction can also be claimed for up to 20% of income from qualified REIT dividends and 20% of qualified income from publicly-traded partnerships . So the deduction can potentially be a big tax saver. The deadline for setting up a SEP-IRA for a sole proprietorship business and making the initial deductible contribution for the 2020 tax year is October 15, 2021 if you extend your 2020 return to that date. Other types of plans generally must be established by December 31 if you want to make a deductible contribution for this year. So hurry! The deadline for the contribution itself is the extended due date for your 2020 return.
A small business owner only pays income taxes on profits. How many small businesses made profits in 2020? Zero? How many went bankrupt? Thousands.
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