Financial Intelligence: Taxed Out

To save on your taxes, try these five year-end strategies.

By Chelsey Lucas October 31, 2014

by Lori Johnston

To save on your taxes, try these five year-end strategies.

AS THE HOLIDAYS START TO TAKE OVER, give yourself and your business a gift by setting aside time to squeeze out tax savings for 2014. These five strategies could be a way to invest in your business and employees and receive tax benefits this year.

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Don’t go on a shopping spree, but if you anticipate needing business equipment or software in 2015, purchase it before the year ends. In past years, businesses could write off up to $500,000 when buying new or used items. For the 2014 tax year—unless Congress acts by year-end to raise the Section 179 expense deduction benefit—businesses are limited to a much smaller write-off of $25,000. (This benefit applies to assets that generally have a depreciable life of seven years or less.)



Setting up plans, such as a SIMPLE (Savings Incentive Match Plan for Employees) IRA, ROTH IRA, SEP (Simplified Employee Pension) plan, 401(k) or Solo 401(k), can save for the future with positive tax consequences for the employee, business owners and the company. The company contributions are a tax deduction, says Barbara Wright, president of Sarasota-based Wright Accounting. “One of the last good things the IRS gives you, with no questions, is being able to set up some type of retirement program,” says Beth C. Ebersole, a CPA and shareholder with Kerkering, Barberio & Co., CPAs, in Sarasota. “You get a current deduction, but the money is still yours.” Each plan has contribution limits, some of which are related to annual income amounts.



Tax provisions related to the Affordable Care Act are still in flux, but Wright recommends that anyone who is self-employed use the self-employed health insurance deduction.

This benefit is tied to money spent on premiums for health and dental insurance, and a limited amount of long-term care premiums. The deduction for health insurance is the amount paid on premiums, and is limited to the net profit of the business, Wright says. Only the long-term care premiums are limited based on age, so the older you are, the higher the amount of premiums that can be deducted as health insurance.

If you have fewer than 50 employees, there’s also the employer-paid health insurance credit. If employers pay at least half of the health insurance premium for employees, a credit of up to 50 percent, for a maximum of two years, is applied to the income taxes paid by a business. For a nonprofit, the credit is applied to its employer tax liabilities.


“Take full advantage of the vehicle deduction.”



Before backing out of that parking spot, take a moment to jot down the mileage. “Take full advantage of the vehicle deduction,” Wright says. The 2014 standard federal rate is 56 cents per each business mile driven. She advises that business owners and their employees keep a mileage log of odometer readings and the trip purpose. You can use good old pen and paper, or track it on a smartphone with mileage and GPS apps.

Visits to customers and vendors (that includes your accountant) count, as well as trips to the post office and bank, and to buy supplies. Also, don’t forget trips to meetings and seminars, chamber of commerce or industry association functions, and even networking events. “Sometimes people don’t think about all of those things as being directly related to business,” Wright says.

Pay attention to where you are starting your mileage. If you have a home office, your mileage starts as soon as you leave your driveway. If you don’t meet the IRS qualifications for a home office, the mileage starts after the first stop; the distance from the last stop to home is not counted.



If your business is in manufacturing, construction, engineering, software development or other industries that build or make new products, there is a credit of 9 percent of your earnings from the sale of those products. The activity must take place in the U.S. and use new parts, Wright says. “New house construction or new commercial construction can qualify, too,” she says.

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