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Welcome To The Q4 Shuffle: Year-End Tax Planning

—And How The Recent Election Can Put Your Plan on Hold.

What does Q4 mean for your business? For many of us, that means year-end tax planning. The expiration of some 2013 provisions may frustrate your efforts in 2014, particularly for business owners. And here’s another kick in the pants….this fall’s midterm elections may hold you up as well.

The following tax breaks were among those that expired at the end of 2013:

  • Section 179 enhanced election –
    • Prior to 2014, Section 179 permitted businesses to immediately deduct, (rather than depreciate), up to $500,000 in qualified new or used assets.
    • While the election is still available, the 2014 limits have been dramatically reduced to $25,000 and $200,000, respectively, due to Congress failure to extend the enhanced temporary provisions
  • Bonus depreciation –
    • This tax break allowed businesses to claim an additional first-year depreciation deduction equal to 50% of qualified asset costs.

Although Congress is considering bills that would restore enhanced Section 179 expensing and bonus depreciation retroactively to the beginning of 2014, don’t expect action to be taken until perhaps as late as the beginning of 2015.

But It’s Not All Bad News…Here’s What You Can Do:

For business planning purposes, consider:

  • Making qualified asset purchases that are necessary to run your business, regardless of whether you can take the tax break.
  • For less urgent asset needs, consider spending up to the current $25,000 limit
  • For additional planned asset purchases, closely monitor developments in Congress and be prepared to act quickly if and when “tax extenders” are enacted
  • Whether your business qualifies for the domestic production activities deduction.
  • For cash basis businesses –
    • Deferring income to 2015 by delaying invoices until late in the year.
  • Accelerating deductions into 2014 by paying certain expenses in advance
  • For accrual basis businesses –
    • Deferring the tax on certain advance payments received
    • Accruing and deducting year-end bonuses that will be paid within the first 2 ½ months of 2015
  • Changing your tax accounting method from accrual to cash or vice versa if doing so will lower your tax bill.

…And For Your Individual Taxes:

Defer income and accelerate deductions by –

  • Asking your employer to pay your year-end bonus in early 2015
  • Paying your property taxes early
  • Make your January 2015 mortgage payment in December
  • Use your credit card to pay deductible expenses or make charitable contributions, even if you don’t pay your credit card bill until next year
  • Evaluate your investment portfolio to identify those that are performing poorlythat may be sold to offset gains

What can you do now to maximize your 2014 deductions and stay on track for year-end tax planning? Contact your DSJ accountant today at 516-541-6549 or 212-399-8969.

 

 
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