Few people look forward to filling out their taxes, but small decisions in the process can have a major effect on how much you end up spending or how much you receive on your return. Clever business owners know that every little edge they can get can help them coming into the next year, and that’s why there are some very important questions every entrepreneur should be asking before sending in their return. Consider these before you file.
How Should I Time My Income?
Sometimes situations where arise where a business owner can choose either to declare income in the present year or push it forward to the next, you have a difficult balancing act to consider. In most situations, you’ll ideally want to take the income in the year with the lower profit. There’s a bit of a guessing game involved here, but looking at any windfalls or mishaps that occurred in the prior year and making meticulous predictions for the future can help you save a little more on your tax liability looking forward.
How Can I Take Advantage of Automobile Deductions?
Automobile deductions can be tricky for entrepreneurs since there’s often a lack of clarity between what can and cannot be deducted as a business expense, but there are more options for deductions available to you if you also work from a home office. Since the commute to a home office doesn’t require any drive time, you can count appointments and drives back to your office as travel deductibles. If you’re looking to invest in a new vehicle, you may want to go big as well. Changes made in the Tax Cuts and Jobs Act mean you’re allowed 100% first year bonus depreciation on a heavy vehicle (i.e. an SUV or truck weighing over 6000 pounds) in the first year.
Can I Transfer Income to My Children?
While it may seem a bit dubious, the language of the tax code does allow you to alleviate some of your tax burden by shifting income to your children. If you pay your child an income for working at your business, that money will be charged at their tax rates. Just keep in mind that this only applies to earned income. By taking advantage of the $12,000 tax bracket for children, you can mitigate that amount of liability completely.