By: Jacob A. Stewart, JD

We are down to the last two months of the year. Do you know what your taxable income looks like for 2018? Have you maximized available deductions? Most business owners have no idea how much less they could be paying in taxes with a little strategic planning. The tax code is made for business owners! Take the new tax law, for example. If you have less than $315k (married) or $157,500 (single) in taxable income, you get a bonus 20% deduction on all Qualified Business Income (QBI) under Section 199A of the new law. If you don’t know what is considered QBI, or if you find yourself above those income thresholds, you would likely benefit from some strategic planning. Here are some other ideas to consider:

1) Business expense reimbursements- Your business can reimburse you for many different out-of-pocket expenses that you incur throughout the course of the year. If not reimbursed by December 31st, your deduction for these expenses could be limited or reduced by the 2% exclusion on your personal tax return and/or by the alternative minimum tax. Reimbursable expenses might include home office expenses, office equipment purchases, business and licensing fees, mileage, travel, etc. Make sure your business has an accountable plan in place so that reimbursements are allowable and properly documented according to IRS guidelines.

2) Home rental deduction- The tax code allows you to rent out your home (and/or a vacation home) for up to 14 days per year tax-free. If you are a business owner and use the non-office part of your home for meetings or other business-related events throughout the year, you need to be sure to properly document those events and have your business pay the proper rental amount to you by December 31st.

3) Equipment and other large purchases- If you need to purchase a new business vehicle or other large piece of equipment, now might be the time to do it, or it might be better to wait until next year. Strategic planning is essential in order to maximize your deduction.

4) Income shifting and charitable donations- If you plan on shifting income to your children or other family members (rather than gifting it), you need to be sure to do so by the end of the year. There are multiple regulations related to income shifting. Strategic planning can make a very big difference in the amount you save (and it can keep you out of trouble with the IRS). The same applies to any charitable donations you can make before the end of the year (including food, clothing, furniture or other non-money donations).

5) Other deductions- If you have been thinking about setting up a business entity or an employee benefit plan, or if you will make over $250k this year, there are some higher-level planning strategies you might be able to use. The window is quickly closing for this year. A tax strategist can discuss the pros and cons of your plan and work with your other advisers to implement the plan in time to reap some of the rewards this year.

There are hundreds, maybe thousands of deductions available if you know where to find them and how to properly use them. Good planning also takes time. If you don’t act in the next few weeks, several options will no longer be available for 2018.

This article is meant to provide general information and should not be construed to contain individual tax or legal advice. Feel free to contact me at 801-923-8350 or jacob@intervivosplan.com with any legal or tax questions or to discuss how succession planning can benefit your business.