It’s not too late to make moves to reduce your 2013 taxes if you are a business owner.
• Use the new “streamlined” home-office rules. Many self-employed taxpayers declined to claim the home-office deduction because it was so complicated to compute. For 2013, the deduction is streamlined, allowing for a deduction of $5 per square foot, up to a maximum of 300 square feet or $1,500.
• Create a retirement plan. It’s not too late to create a retirement plan for yourself and your employees if you have them. The plans can be simple to set up and administer, such as a Simplified Employee Pension (SEP) plan. A 401(k) plan could be established even for a one-person business. While some of these plans must be established by the end of the year, most can be funded up to the extended due date of the tax return.
• Purchase business equipment. Up to $500,000 (scheduled to be reduced significantly to $25,000 in 2014) in business equipment purchases can be expensed this year, rather than being expensed over a number of years. Additionally, there is also a 50 percent bonus depreciation allowance (that will not be available in 2014) if your purchases exceed the $500,000 limit. 2013 might be the last year to maximize your equipment purchase deductions to such an extent.
• Deduct health insurance. If you are self-employed, you are allowed to claim 100 percent of the amount paid for health insurance for yourself, your spouse, and your dependents as long as you follow certain conditions.
• Consider credit card purchases. If you want to purchase equipment or supplies for your business before the end of the year, but you are cash-strapped, consider using your credit card. Your deduction occurs this year when the purchase is made, not next year when the credit card charges are paid.
For guidance with year-end tax planning for your business, contact our office.
Thomas R. Seitz is a certified public accountant at Wessel & Co.