Small Business
Business INSIGHTS e-News for Professional Services
Year-Round Tax Tips for Firms

Don't forget these write-off opportunities that are available to your business.

While tax attorneys are busy helping clients maximize their deductions, they often overlook tax benefits for their own companies. Here are a few year-round savings opportunities to keep in mind.

Maximize Charitable Contributions

Only contributions to IRS-designated "qualified organizations" are deductible. To see if an organization qualifies, go to the IRS Charities and Non-profits page: http://www.irs.gov/Charities-&-Non-Profits/Search-for-Charities. Get a letter of receipt from qualified organizations for contributions of $250 or more. Property donations can be deducted for their fair market value at the time of the contribution, but firms cannot deduct a contribution previously written off as a depreciated asset.

Although many firms donate employee time, such as volunteering at the local blood bank or animal shelter, firms cannot deduct the value of that time.

Firms can only deduct the amount of the contribution not reimbursed with goods or services. For example, if your firm donates $1,000 and receives a $50 gift card as a thank-you, only $950 is deductible.

Business Loans as Income

Business loan principle and interest are generally deductible. The total amount of the loan must be reported, and the assets and expenditures financed must be necessary to running your business. While most business loans are not considered income, loans reduced or forgiven are considered a gain, so you will owe taxes on that amount.

Hire a Veteran

Firms that hire certain unemployed veterans through 2013 may be eligible for a tax credit of up to $9,600 per qualified veteran for for-profit employers or up to $6,240 for qualified tax-exempt organizations. The amount depends on a number of factors, so refer to the IRS information at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Expanded-Work-Opportunity-Tax-Credit-Available-for-Hiring-Qualified-Veterans for details.

Classifying Equipment vs. Supplies

Deducting tangible personal property--such as computers and office furnishing--as supplies rather than as capital expenditures (equipment) can be problematic. While the IRS does allow most small business to deduct up to $24,000 in capital expenses in the year the items were purchased, expenditures over that amount may need to be depreciated. Make sure you are classifying expenses properly.

Watch Gift Giving

Giving gifts to your most profitable clients and best vendors is a deductible expense in most cases, but the IRS only allows a deduction of up to $25 per individual per year. You can certainly give gifts worth more than $25, but you won't be able to deduct the full value.

For more information, visit the IRS's Small Business and Self-Employed Tax Center at: http://business.usa.gov/external-site?ccontent=http://www.irs.gov/businesses/small/index.html

 


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