Do you want more deductions in 2019?
If you are anything like my clients, I know that you don’t want to overpay on your taxes and you also want to make your money work for you. If this is your goal, then finding ways to reduce your tax bill is extremely important. Even if it means getting these last-minute savings tips implemented for 2019.
Your next step is to make a decision in the next few days, and also, to speak to your provider before the clock strikes 12 am on December 31st. The list of deductions below is most suited for business owners who have not done any planning all year, those who receive a large payment in the fourth quarter, or those who have some extra cash to take advantage of these savings.
Your final options to save money on your taxes for 2019 include:
1. Employee Rewards – I know you want to show your employees that you really care about them with a holiday gift. But surprisingly, the IRS only allows a tiny deduction of $25 per person as a deductible gift. I completely understand that your employees should get a gift that is more valuable, so your only option is the make a few changes to the reason why you are gifting. Instead of giving a holiday gift, tie this gift to an incentive like a performance-based metric. For example, if one of your employees provided exceptional customer service in 2019, then that is the performance metric that you can use to base your gift. You will be able to deduct 100 percent of the value of the gift as a fringe benefit to your employees. Now, this is the right time to do a performance review and add a little incentive to the process. You get a tax deduction and your employee is happy for the holidays.
Take away – think of one area that you want to reward your employees in and give them something that truly shows you care.
2. Prepay your expenses – There is still a rule in the code that allows you, as a cash basis taxpayer, to prepay your expenses. The only requirements you will have to meet are ensuring that the expenses that you are prepaying do not extend past the next 12 months. So for example, if you’re prepaying your rent, you can only prepay 11 months of rent, only this amount will qualify for a deduction in December 2019. Before you prepay any expense, check with your vendor.
Take – away – Think about what expenses you may have for 2020 that you can go ahead and pay. Remember, the benefit should not extend past 12 months.
3. Delay collecting income – this one will depend on if you can afford to do so in your business. If you are expecting a higher revenue in December, you can delay those invoices and collect them in January. Since tax returns are cash basis, if the money didn’t get into your bank account then that income is not included in your tax returns. Once the money comes in for 2020, then you can better plan for 2020 with other tax planning strategies and loopholes.
4. Give and give more – if you are able to take the itemized deduction on 2019 tax return, then give more to your favorite charity. This can be cash donations and/or physical items to goodwill. Charity deductions can still help to get a good write-off to reduce your taxes. If you are a business owner and you don’t claim the itemized deduction, you will have to give more than $12,200 (Single) or $24,400 (Married) for it to count as a deduction. If you are only able to donate less than this amount, consider sponsoring an event for your favorite charity instead of donations. You will get maximum deductions as marketing expenses on your business return if you do a sponsorship.
Take-away – See if you qualify to claim the itemized deductions. If you do, then all charity donations can be deductible. If you don’t, then your giving should be more than 12,200 (Single) or $24,400 (Married).
The advantage of this list is that they are easy to implement and take no additional effort on your part. Until then, tax season is around the corner.
Happy savings for the holiday season.
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This has been a JBF Business Media production.