Business Tax Breaks You Should Know

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Business Tax Breaks You Should Know

Running a business of any size is hard enough, but when tax time rolls around, it suddenly becomes even more difficult. Knowing what you can and can’t deduct can be extremely confusing, especially since the tax laws keep changing from year to year.

So for your 2018 taxes (due next month), here are a few tax breaks and deductions that could help improve your business taxes — and your business life.

  • Corporate taxation. The graduated tax rate structure for corporations is being changed from a top tax rate of 35% to a flat rate of 21%. This means that the overall tax liability for a lot of C corporations will be reduced. Pass through entities like LLCs with get a 20% deduction as well. So you won’t have as high a tax rate as previous years, which can make things easier for you.
  • Bonus depreciation. Before now, the percentage for first year bonus depreciation deductions fluctuated noticeably, making it difficult to plan for taxes. For 2018, the updated law raises the bonus depreciation deduction from 50% to 100% for five years before gradually phasing out the deduction over five years.
  • Business expenses. Being able to deduct your business expenses has always helped organizations lower their overall tax burden. And now the amount you’re able to deduct is increasing. The amount you can expense from Section 179 has increased from $510,000 to $1,000,000 for things like business equipment, computers, office furniture, etc. There is a catch though — the maximum allowance is still capped by the amount of income from business activity.
  • Qualified business income deductions. For owners of pass through entities like sole proprietorships, partnerships, S corporations, and limited liability corporations, you may be allowed to deduct 20% of your income. You must have taxable incomes below $157,000 for a single filer or $315,000 for married couples filing jointly. Though not everyone qualifies (sorry doctors and lawyers), it could still help quite a lot on your tax bottom line.
  • Retirement plan contributions. Did you know that you can save a lot on your taxes by setting up a retirement plan for your company? Many business owners think this is something that only benefits large corporations, but in reality, a defined benefit plan could help businesses of any size. These plans can save more for your retirement than a typical 401(k) plan can, but they are complicated, so make sure you talk with a professional when creating one for your business.

Running a business is hard enough, but your taxes shouldn’t be another burden you have to worry about. These tax breaks and deductions could really help take the edge off. Always talk to a tax professional before taking any of these deductions to ensure that you qualify, and to help you find additional ones you might not be aware of.

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