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Biggest Year End Tax Saving Moves For Small Businesses

The drama continues on Capitol Hill as lawmakers are at a stalemate on whether or not to move forward with the expiring Bush-era tax cuts. It may come down to the wire, but many small businesses can’t wait that long. It’s best for small businesses to plan for what we know is going to happen or is scheduled to in 2013.

Prepare to make your capital equipment and asset purchases in 2012small-business-tax-moves-2012
Businesses have a good reason to move forward in 2012 with their Section 179 or Bonus Depreciation equipment purchases as opposed to waiting until 2013. The Section 179 deduction is scheduled to drop from $139,000 to $25,000 in 2013. Please note that the $139,000 ceiling is reduced dollar for dollar if a businesses puts more than $560,000 of assets into use during the year. In addition, bonus depreciation is now 50% for all purchases of new property/equipment and is set to expire all together in 2013. Please also note that bonus depreciation can only be used on new assets with a useful life of 20 years or less. We’re still not holding our breath for either of these business tax breaks to be reinstated in 2013 to 2012 levels.

It is also smart to purchase your business vehicle in 2012 as opposed to waiting until next year. The maximum Section 179 deduction that you can claim for putting a business vehicle in use is $11,160 in 2012 versus only $3,000 in 2013. If you plan on purchasing a large SUV that weighs over 6,000 pounds, the tax break is even bigger at $25,000 with a 50% bonus depreciation thereafter and then a 20% of normal depreciation. Needless to say, 2012 is the year to buy a vehicle if you have plans to do so in the near future.

Paying out your end of year salary in dividends
Those stakeholders with a low corporate income tax rate and a higher personal income rate, may want to seriously consider electing to pay out dividends as opposed to taking salaries at the end of the year. Make sure that you pay yourself a reasonable salary during the year as excessive dividends with no salary for a active employee/owner can raise a red flag.

More questions? Get business tax help online.

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