What to do before the year ends to affect your tax liability for 2018. There is still a little more than a month to do some things that can lower your 2018 tax liability for your business.
- Purchase any assets that you are going to need in the next few months now. If you purchase them before the end of the year, you will get accelerated depreciation on them and that will decrease your taxable income for 2018
- If you pay bonuses to your employees, consider paying them before the year ends instead of in early 2019 to get the deduction in 2018.
- You still have time to open a retirement plan for 2018. It might be tough to get a 401(k) going for 2018, but you could create a SEP and fund it for yourself in either 2018 or 2019 and get the deduction in 2018. What you might want to consider is giving raises via retirement funding. If you fund retirement accounts for your employees, they have immediate access to the funding, but you do not pay employment taxes on these funds. So it is a great benefit for them and a cheaper way for you to increase their compensation, just now in their wage base.
- If your cash flow is good, delay billing for services until early next year so the income is not reported in 2018. This is for cash-based taxpayers only. If you can afford to wait to get paid, invoice in January instead of December and delay the reportable income until next year.
- Stock up on supplies that you will use in the next few months. This time of year, I buy a lot of paper because we will use it during tax season, so I just stock up. Any other types of supplies that you will consume, get them purchased in December to accelerate that expense into 2018.
So, the name of the game in tax planning at year end is to accelerate expenses into 2018 and delay revenue into 2019 wherever possible.
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