What are you doing to save money for your company?
While you have a good number of options you could use to save money, nothing beats the tax-saving effects of tax breaks and tax deduction.
There are numerous legitimate tax breaks that your company could take advantage of for lowered taxable profit.
Thanks to these tax breaks, you get to put more money in your pockets at the end of the year, and the tax provisions governing the deductions will also ensure that you enjoy a good number of personal benefits.
Whether you run a small business or have expanded operations significantly in the past few years, here are some of the tax breaks, you should be aware of:
1. The Qualified Business Income Deduction
One of the new tax breaks you should take advantage of is the 20% qualified business income deduction, a tax break that was enacted specifically for the small businesses.
This break applies to companies that record a taxable income not more than $157,500 for single individuals and $315,000 for married business owners.
The limitations do not, however, apply for any amounts above the cap. Within limits given, a 20% non-taxable income is enjoyed.
Lawyers and other specified professionals have to earn at least $207,500 if single and $415,000 if married to enjoy these benefits.
2. Entertainment Out – Meals Still In
According to the new tax law, write-offs on business-related costs of entertainment have been written off.
However, businesses are still allowed to write off some of the expenses.
For example, the holiday parties are 100% deductible of the employer’s costs.
Also, meals purchased by employees on business travel are 50% deductible, and the new laws also note that until 2025, cafeterias and other employer-operated facilities (eating) are 50% deductible.
Entertainment costs are, however, not deductible anymore, even though there are mixed interpretations about whether meals offered by a company after a business meeting are deductible at 50% or not.
To be sure about the deductible contributions and the ones that aren’t, you might want to check out the latest IRS guidelines.
3. Depreciation
With the new changes in tax laws, depreciation is now available as a tax break once again.
So, if you have been thinking about capital expenditure, then this could be the perfect time for you to buy one.
Today, the TCJA allows 100% bonus depreciation on the total cost of the qualifying assets purchased and immediately put into the company’s service, specifically from September 27th, 2017.
This provision will last up until 2022 from where the deduction will be phased out at 20% each year, thereafter.
The depreciation tax break is available for all new and used assets that have an expected lifespan of 20 years or less.
4. Medical and Family Leave Tax Credits
In a move to encourage the small business owners to help their employees with the family and medical leave needs, the new tax laws stipulate that the companies that offer paid medical or family leave to employees would enjoy 12.5% temporary tax credit.
The credit is 12.5% of the total wages paid to the employees during the leave period.
However, if the employers pay their employees more than half the normal monthly salary, then the tax credit would increase.
For your company to qualify for the tax credits, you need to establish and communicate with your employees about your paid leave policy.
5. R&D Tax Credit
The R&D, or research and development, tax credit is a tax credit that benefits companies conducting r&d.
This credit was made to incentivize innovation across a wide range of industries in the U.S.
Figuring out whether or not your company qualifies for the R&D tax credit can be a daunting task.
For help calculating what you could be getting back from this credit it might be useful to use a tax credit service.