Small Business Tax Strategies

When a couple with minor children divorce or separate, one key consideration is the custody of the kids. But this raises an interesting question: Who gets custody of the kids’ dependent exemption deductions?

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In a case of first impression, the 9th Circuit Court of Appeals reversed the Tax Court’s earlier ruling and concluded that the limits for mortgage interest apply on an individual (per-taxpayer) basis when homes are co-owned by unmarried individuals. As a result, an unmarried couple that owned homes together could write off the interest on a combined total of $2.2 million of mortgage debt.

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Gear up for the Cadillac tax … There’s a new due date for FBARs … It’s getting tougher to qualify as an independent contractor.

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Do you own a boat or a car you might donate to charity? Before you pull the trigger, consider another option.

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Are you paying interest on a personal loan or credit card charges? Generally, you can’t derive any tax benefits from the interest on these loans. It’s considered a personal expense and is therefore nondeductible. Strategy: When appropriate, consolidate debts under a home equity loan.

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If you recently acquired or started a new business, or if it took several years for your company to become profitable, you may be ready to put more money into employee benefit plans like a qualified retirement plan. Strategy: Get your retirement plan going before the end of the business tax year. This will entitle your business to a tax credit—a dollar-for-dollar reduction of the company’s tax bill—for plan startup costs.

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Suppose that your child in college plans to move off-campus next semester. At the same time, you’re looking to buy real estate to shelter income from tax. This could be an opportunity to kill two birds with one stone.

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Suppose your employees regularly incur business expenses that aren’t reimbursed by your company. For example, they might personally pay for business travel or tools. In that case, there’s a way to save income tax for employees while cutting payroll taxes for your company.

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There’s a way to simplify recordkeeping for business travel expenses. Use IRS-approved per diem rates. Your company can rely on this shortcut for lodging and meals and incidental expenses of employees on business travel.

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Now that autumn has arrived, it’s time to begin “harvesting” capital gains or losses from selling securities held in taxable brokerage firm accounts.

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