Legit Last Minute Savings on Taxes:
Car expenses. The rule is you can deduct the costs of operating a car only when that car is being used for business purposes. Keep track of the miles you drive and add them up at the end of the year. The deduction rate in 2011 was 50.5 cents per mile and in 2012 is 55.5 cents per mile for business-related driving.
Travel. In addition to car travel, you can also deduct the cost of plane fare, taxis, lodging and meals as long as the trip was undertaken primarily for a business purpose. Additionally, travel expenses paid or incurred in connection with a temporary work assignment away from home are deductible.
Education. As a small business owner, staying up to date on the complexities of your industry is imperative for operating a successful business. Author Stephen Covey calls this “sharpening the saw,” investing in yourself to become smarter and more effective. You can deduct education expenses if the courses you take are related to your field and help you run your business.
Software. Most software programs bought for business purposes have to be depreciated over a period of 36 months. But if the software is only useful for less than a year, you can deduct its cost as a business expense in the year that you buy it. With rapid changes in technology and software constantly being updated and replaced, this is becoming a more common source of tax savings.
New Equipment. The key here is “new.” Section 179 deduction can sometimes allow a small business owner to write-off the full costs of new equipment in the same year they were purchased. This year you can write-off up to $139,000 in expenses, and half of what you spend above that amount. The writeoff starts to decline once your total spending exceeds $560,000.
Profit Sharing. It’s nice the Uncle Sam lets you deduct a key tool for attracting and retaining high-quality employees and increasing productivity. That’s right: A profit sharing plan does this for us, and more. Your contributions to retirement plans (and often plan expenses) are generally tax-deductible. You may also be eligible for a tax credit for establishing a qualified retirement plan.
Carryback. In addition to tax-deductible expenses, executing a net operating loss (NOL) carryback is another good way to recoup some of the losses you suffered during the recent economic crisis. This deduction allows you to offset one year’s losses against another year’s income. Calculating a NOL can be tricky and we suggest that, if you have one, you consult a tax professional to help ensure you do it correctly.
Have more questions? The IRS is actively working to make information more easily accessible, and believe it or not, they have social media tools that describe tax changes, initiatives, products and services. Check out the IRS2Go phone app (for iPhone and Android phones), YouTube, Twitter, Facebook, and free IRS podcasts on iTunes.
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