Business Tax Strategies to Implement Before Year-End

Graphic source: netsapiens
Year-End tax planning shouldn’t just be a thought, it should be an automatic routine once the 4th Quarter rolls around. There are some last-minute tax strategies that all small businesses should consider implementing before the year ends. Here are a few:
  1. Tax Loss Harvesting: Tax loss harvesting should be reviewed yearly for anyone with stock investments. Offsetting gains that may have been realized earlier in the year or allowing for a partial loss against active income (up to $3,000 per year), tax harvesting makes sure you are intentional about realizing losses or gains that will reduce your tax bill in your favor.
  2. Prepaying your 2023 expenses in 2022: You can thank IRS tax-deduction safe harbor rule, which allows prepaying up to 12 months of expenses, according to Reg Section 1.263(a)-4(f). This safe harbor allows for a lot of flexibility especially if there is a higher profit this year than usual.
  3. Buying Office Equipment: Bonus depreciation along with increased limits for Section 179 allow for a potentially huge tax break. The best part is that this huge tax break doesn’t have to require a huge cash outflow. Financing with a minimum down payment will still allow for the maximum deduction allowable. Purchasing the equipment and placing it into service before year end may just be the solution to cut your tax bill. You will want to meet with your tax advisor to see how much of a tax break this may allow you and how it will impact potential 199A deductions
  4. Qualified Improvement Property (QIP): The CARES Act has made changes to qualified improvement property (QIP) allowing for some beneficial tax savings. According to William Bradford, CPA a “QIP is any improvement made by you to the interior portion of a building you own that is non-residential real property (think office buildings, retail stores, and shopping centers)—if you place the improvement in service after the date you place the building in service.
    QIP is not real property that you depreciate over 39 years. QIP is 15-year property, eligible for immediate deduction using either 100 percent bonus depreciation or Section 179 expensing. To get the QIP deduction in 2022, you must place the QIP in service on or before December 31, 2022”