Now that it’s the new year, it’s time to set our focus towards the next big event: The new tax year. As the 2020 tax season is just over the horizon, businesses everywhere are preparing to submit their 2019 records to the IRS before the upcoming deadline.
With so many new changes for this year’s taxes, thanks to the Tax Cuts and Jobs Act, there are more than a few ways to really impact your bottom line during this upcoming tax season. Here’s a look at a few year-end tax strategies that can help businesses reduce their 2019 federal income taxes:
Defer Income until 2020
Did your business have a high-earning year in 2019? Do you expect that number to be a bit lower in 2020? If that’s the case, there’s a good chance you’ll benefit from deferring your income until next year. Doing so could help you fit into a lower tax bracket next year instead of taking the hit of higher costs for the tax year 2019. It’s a great way to give your organization a little breathing room in what could have been a tight end to 2019 and leaves you with valuable time and flexibility to make all of the numbers work in your favor in 2020.
Take Advantage of Bonus Depreciation
Any property acquired after September 27, 2017, and put into service in 2019 is eligible for a significant tax cut. Taxpayers may deduct up to 100 percent of the cost of qualified properties in 2019, leading to great savings as you pay your taxes this year. Additionally, new and used properties can also claim bonus depreciation. If you’re planning to acquire a business, think about structuring the acquisition as an asset instead of a stock, as it could save you in your taxes as well.
Write Off Equipment Purchases
Many of your 2019 equipment purchases are eligible to be written off under a §179 election. This includes qualified real property and software for your business. You can deduct otherwise depreciable business property, and add to your savings for the tax year 2019. This even applies to improvements like roofing, heating, ventilation, fire protection, and security systems, which usually wouldn’t qualify for bonus depreciation but can still help you save via the §179 election.
Accelerate Bad Debts
If your business’ accounting department uses the accrual method, there may be an additional way for you to save this tax season. Try taking a closer look at your accounts receivable, and identifying specific bad debts that are completely or partially worthless. These can be written off, and you will be given a deduction in return. Just make sure to include these write-offs in your year-end financial statements if you’re looking to complete this process before you submit your taxes.
If you would like to learn more about how we can help you and your business improve its accounting practices, reach out to our team. For more information on other accounting topics, check out our blog.