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End of Year Business Deduction Review

  • 29 October 2014
  • Author: Cari Holbrook
  • Number of views: 3601
End of Year Business Deduction Review

Accelerate or defer business expenses? That’s the question often weighing on the minds of business owners this time of year. The answer you choose could help you finish out the year strong by taking full advantage of tax deductions. Further complicating the decision this year, however, is Congress. The limits for expensing the cost of business assets like vehicles and equipment have been reduced from $500,000 (from 2010 through 2013) to a mere $25,000 in 2014, and first-year bonus deductions made available since 2012 have expired. It is anticipated that the current Congress will pass an “extender bill” in November (after the election), but nothing’s certain. What is certain: Checking with us before the end of the year is a smart move. We’ll be able to help you decide how to handle last minute expenses with both your business situation and changing federal tax rules in mind.

Below are a few ideas for expenses you may choose to accelerate or defer before the end of the year.

Technology Purchases

For the most part, technology purchases can be expensed 100 percent (up to the current maximum threshold of $25,000) in the year purchased, under IRS Section 179 guidelines. There are some exceptions to this rule, however. Computers may be fully or partially deducted the first year while computer software, on the other hand, must be depreciated over a 36-month period. Some of these rules have changed since 2013 so check with us before assuming the same rules apply to the purchases you’ve made in the past.

Business Vehicle Purchases

Before rushing out to purchase a new business vehicle by year’s end, note that bonus first-year depreciation for autos, light trucks and vans no longer applies. It’s also important to note that the IRS is becoming increasingly vigilant about its “placed in service” rule (this rule applies to other purchases like computer equipment as well). If the vehicle you plan to purchase needs modifications for its intended use, you’ve entered a grey area in which you may not be able to claim a deduction when you’d like. For more information on that issue, review our article on Depreciation Nit-Picks That Could Cost You.

Staff Parties and Gifts

Did you know that if you follow certain restrictions your staff holiday party could go from 50 percent to 100 percent deductible?  Holding the celebration at the office, including employee appreciation awards, and treating clients and contractors separately can all help.  For more ideas, take a look at our previous post on Holiday Parties with Surprising Tax Advantages.

Charitable Giving

Have you ever considered giving appreciated stocks and other applicable capital gains to charity?  It’s a great way to give AND receive because tax deductions on stocks held for more than a year are based on fair market value—the gain on the stock is not taxed. This may allow you to “double” your tax benefit: a deduction for charitable giving, plus tax avoidance on the gain based upon the stock’s appreciated value. For more reasons to look at this particular strategy, review our previous post Charitable Giving Tip That Could Save You Thousands.

Deferred Income

If you’ve seen heavy capital gains this year, review your portfolio and harvest losses from other applicable investments. Gains can be offset by losses up to 100 percent. You may want to also defer income at the end of the year, if possible, to help offset gains in other areas. For simple tips on deferring income and offsetting gains, review our past article Defer Income to 2014? Yes, You Can!

Again, this is just a sampling of the different tax strategies you may want to take before the end of the year. Feeling inspired? Contact us to help you decide which strategies make the most sense for your business.


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