Taking advantage of business tax credits and deductions may result in substantial tax savings.1 Buy business equipment this year. The higher Section 179 deductions for new equipment purchases enacted for 2008 have been extended through 2009. Equipment, computers and furniture can be depreciated over several years, or the full cost can be deducted in the year of purchase, up to $250,000.
2 Write off home-office expenses. You can do this even if you use the space for administrative purposes, as long as you use your office exclusively for business. Keep in mind, you can only deduct the portion of your expenses (rent, utilities, insurance, housekeeping, etc.) that's in proportion to the square footage of your house used for business purposes.
3 Track and claim your business mileage. The standard mileage rate in 2009 for operating your car for business use is 55 cents per mile.
4 Look for deductions related to medical expenses. For 2009, eligible self-employed individuals can deduct from their gross income 100% of the amounts paid for health insurance coverage, subject to some limitations.
5 Consider Health Savings Accounts (HSAs) with a high-deductible health plan. Up to specified dollar limits, you can generally exclude your cash contributions to the HSAs of qualified individuals from tax withholding.
6 Write off bad-debt expense. While a reserve for bad debts is not deductible, you can write off accounts receivable in the year in which they become uncollectible. You may also benefit from donating excess inventory to qualified charities by year-end.
7 Claim business losses. If your company has a net operating loss in 2009, it can be carried back two years or carried forward up to 20 years to offset future profits.
8 Set up or contribute to a retirement plan. Employer contributions to qualifying retirement plans, including 401(k) and SIMPLE (Savings Incentive Match Plan for Employees) are tax-deductible.
9 Take advantage of every new tax break on your 2009 return. New tax provisions benefit certain businesses and situations. In 2009, the American Recovery and Reinvestment Act (ARRA) contained a number of new or expanded tax benefits to create new energy sources. For example, businesses operating new facilities that produce electricity from wind and other renewable resources can choose one of three options to fund the project: a tax credit based on the amount invested, a tax credit based on the energy produced or a grant. ARRA also allows a credit against employment taxes for employers providing COBRA premium assistance to eligible individuals who elected to continue coverage after February 2009.
We can help you take full advantage of tax savings. Talk to your business banker for more information.
| * | Please note that AFCU does not give tax advice. Consult your tax advisor for information about your situation. |
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