Here are two summertime tax moves that could make you smile come tax-return time:
1. Treat clients to a fishing trip or a day on the links this summer. You can deduct 50 percent of your entertainment expenses for clients—meals, drinks etc.—if the entertainment is associated with your business (i.e.,
preceding or following a substantial business discussion).
Take advantage of summer weather to entertain clients outdoors instead of in a stuffy restaurant, and deduct the costs. Tip: You can’t claim depreciation deductions for an entertainment facility such as a lakeside cabin, but you can write off qualified entertainment at the facility.
2. Sidestep a depreciation tax trap. Under the half-year convention, your business can write off the equivalent of a half-year’s worth of depreciation for most assets placed in service anytime in 2006.
But, if the cost of assets (excluding real estate) placed in service during the last calendar quarter of the year exceeds 40 percent of the annual total cost, you must compute depreciation deductions under the less-favorable midquarter convention.
Tip: Start new equipment running before Oct. 1 to avoid any potential pitfalls.