Tax Deductible Expenses

Summer is a Great Time to Think About Tax Deductible Expenses.

For most business owners, taxes are the last thing you want to think about during the summer. After all, you made it through April and, as long as you do a better job this year of keeping your receipts and staying current with the books, you really don’t need to worry much about taxes until next year. That approach, while common, can be a huge mistake. There are certain opportunities you’re only likely to find during those summer months, and so you need to spend at least a little bit of time thinking about your tax situation, and tax deductible expenses.

Here are some common summertime tax deductible expenses you need to consider:

1.Family employees. Hiring one of your children is often one of the most beneficial things you can do from a tax perspective. When you hire your child, your business will get a deduction for the payment your child receives. Like many tax deductible expenses, that reduces the overall taxable income in your company. Your child gets a standard deduction on his or her personal taxes. If you’re a sole proprietor and your child is under 18, you don’t have to pay FICA either. Unemployment taxes start after age 21. The key here is that your child needs to actually do something and receive reasonable compensation. If not, the IRS is pretty good about figuring it out, and you’ll face trouble if you’re audited.

2.Have a company picnic. Employee parties pay off in a couple of different ways. First off, they significantly boost employee morale. On top of that, they also reduce your overall tax bill. 50% of the costs you lay out for food, rental of the facility, decorations, and even entertainment can be deducted. You don’t even have to make the party focused on work at all for the IRS to consider them tax deductible expenses. If you have the party on your business’ property, you can take even higher deductions.

3.Implement some summertime energy savings measures. Giving your business an eco-friendly makeover will not only help you to save money on your air conditioning bill this summer, if you do it right you can also qualify for certain tax incentives. These incentives vary from one year to the next, so make sure you check with your tax expert about what kinds of green activities might give you a boost.

4.Treat a client to a summertime extravaganza. Whether it’s something as simple as a golf outing or something more extravagant like a trip for your best clients to Las Vegas, entertaining clients can offer significant tax savings. Of course, you need to talk with your tax adviser about tax deductible expenses of this type; there are limits on how much you can deduct for certain entertainment and travel activities, and you need to be aware of those limits.

5.Combine business and pleasure. One of the classic tax deductible expenses available while enjoying the summertime travel season is to add some travel days to a business trip. The key here is to make sure that you plan it out fully. A work-related trip can become something of a mini-vacation for you and for your entire family. Make sure to follow all of the rules here; you can’t write off airfare for your spouse or children, their meals, or sightseeing events. Those kinds of things become something of a warning flag, and can often be behind an IRS audit.

6.Touch base with your tax expert for even more summertime tax deductible expenses. The fact of the matter is that tax law changes significantly each year. If you want to make the most of your summertime tax deductions, plan a meeting with your tax advisor in the late spring. Not only can you talk about upcoming summertime tax deductions, you can sketch out a tax strategy that will take you through the rest of the year. Spending time with your tax expert more than just at tax time will lead to increased deductions as well as fewer headaches and less stress for you come tax time.

Summertime is a wonderful time to own a business. The flexibility that can come from being a small business owner lets you do the things you want and love to do, with the people you want to be with. In the middle of all of that sun and fun, don’t forget about your taxes. Taking just a few steps right now can save you significantly on your tax bill, and maybe even pay for next year’s vacation.

Talk with a tax professional about tax deductible expenses.

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