Small Business Tax Deduction Strategies

Section 179 vehicles should be a key part of your small business tax deduction strategies. Can Section 179 property fit in with your business tax strategies?

Let Business Management Daily help you get each and every rental property depreciation credit and business tax deduction you’re entitled to.

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The amount you transfer to a Section 529 plan for college savings on behalf of a beneficiary qualifies for the annual gift-tax exclusion. Strategy: Front-load your contributions to a Section 529 plan. The tax law allows you to give the equivalent of five years’ worth of contributions up front with no gift-tax consequences.

Your company may benefit from a special “bonus depreciation” deduction if it acquires business property this year. The bonus depreciation deduction is equal to 50% of the cost of qualified new (not used) assets placed in service in 2009. What’s more, you may be able to combine bonus depreciation with the Section 179 election.

When is your most diligent worker also your biggest lawsuit risk? Answer: When that nonexempt employee works through his or her lunch break or during other off-the-clock hours—a fact nobody realizes (or turns a blind eye to) until he or she sues for unpaid overtime.

Have you been setting aside funds in a Section 529 plan for your child’s college education? If your child has entered school, you can withdraw the funds tax-free to pay for qualified expenses. But you may be inclined to keep the account intact for a while longer so you can build up even more savings. Don’t do it.

Set aside any notions you might have that the federal bureaucracy is inherently dysfunctional. In fact, Uncle Sam’s best agencies have a thing or two to teach private-sector employers. Here are eight lessons employers can learn from the biennial agency-by-agency ranking of federal employers by the Partnership for Public Service and American University’s Institute for the Study of Public Policy Implementation.

Deductions for employee travel expenses are allowed if they are related to business activities. Strategy: Accelerate business trips planned for January into December. This enables you to write off the travel expenses in 2009 instead of waiting until 2010.

The tax law provides a special jobs credit—called the Work Opportunity Tax Credit—if you hire workers from one of several economically disadvantaged groups. Strategy: Hire qualified workers before year-end. For instance, if you hire a worker in November and pay him or her $2,000 a month, you can claim a credit of $1,600 (40% of $4,000) this year.

If you missed out on the popular cash-for-clunkers program this summer, you can still qualify for big tax benefits for an older vehicle by donating your “clunker” to charity. Instead of trading in your vehicle, simply give it away to a qualified charitable organization. This entitles you to a deduction on your ’09 return.

Q. We may have to pay environmental cleanup costs as a result of an investigation. Can we write off all of the costs on this year’s return?

Suppose your employees regularly incur business expenses that are not reimbursed by your company. For example, they might personally pay for business travel or tools. If that’s the case, there’s a way you can save income tax for employees while cutting employment tax for your company: Set up a salary reduction plan.

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