Accounting Services in Oak Brook - Think biz taxes at mid-year

Where does your small business stand midway through the year? Strategy: Estimate your 2024 tax liability. Then implement some timely tax moves to improve the outlook. Here are five bright tax-saving ideas for small business owners to consider.

1.Buy the equipment you need. If you’re ramping up your business activity, you may need equipment to improve or increase operations. Under Section 179 of the tax code, you can deduct up to $1.22 million of qualified property placed in service in tax years beginning in 2024, subject to a phase-out threshold of $3.05 million. However, the Section 179 deduction can’t cause you to have a business loss. If any amount is left over, claim first-year “bonus depreciation” for the cost of qualified property. For qualified assets placed in service in calendar year 2024, the deduction is 60% of the costs

Tip: Bonus depreciation is available for used, as well as new, qualified assets.

2. Pick up the tab at the club. The Tax Cuts and Jobs Act (TCJA) permanently wiped out deductions for most business entertainment expenses. So, you can no longer write off treating clients to a round of golf. However, you can still deduct the costs of qualified business meals if the food and beverages are invoiced separately from the entertainment. Therefore, if you buy dinner and drinks for a client at your country club after a golf outing, keep records of your dining expenses to support deductions.

Tip: Club dues are not deductible.

3. Hire extra help for the busy season. If you employ workers from certain disadvantaged “target” groups, you can claim the Work Opportunity Tax Credit (WOTC). For an employee who works at least 120 hours in 2024, the credit generally equals 25% of the first-year wages up to $6,000, for a maximum credit of $1,500 per worker. Even better: If the employee works at least 400 hours during the year, the credit goes up to 40% of the $6,000 of first-year wages, for a maximum credit of $2,400 per worker.

Tip: You may be able to claim a special “summertime” credit for hiring disadvantaged youths, up to a maximum of $1,200 per worker.

4. Fire up the grill for tax savings. Suppose you hold a company barbecue or picnic around the Fourth of July or Labor Day. Your company can deduct the full cost of the shindig. The usual 50% limit on meal expenses doesn’t apply to these employer-provided meals. But you must invite the entire staff to qualify for this tax benefit. In other words, you can’t restrict the outing to just the top brass. If you do that, no deduction is allowed.

Tip: You can also invite social guests—say, a few friends—but amounts attributable to those guests are nondeductible.

5. Clear off the shelves. Does your company have excess inventory? Generally, it can write off the cost of the inventory donated for the care of the ill, needy or infants. The deduction equals the lesser of the cost of the donated food, plus half of the appreciation (i.e., the gain if the donated food were sold at fair market value), or twice the cost of the donated food. Normally, this deduction is limited to 10% of the company’s taxable income.

Tip: The limitation is increased to 15% for food inventory.