Year-end Tax Planning for Small Businesses
As 2016 comes to a close, businesses should reevaluate their tax planning for year end. We have brought together the following planning tips for small businesses to consider before the end of 2016:
Accelerate Deductible Expenses
If there are expenses you can accelerate into this year, then the business should consider doing so. For example, a cash basis taxpayer paying property taxes before year end will take the deduction in 2016. Note however that the deductibility of certain prepaid expenses may be limited or non-deductible.
Buy Heavy Vehicles
If you purchase large vehicles such as SUVs, pickups or vans for use in your business before year end, your business may be eligible to write off $25,000 of the purchase cost of a vehicle as a section 179 deduction if the vehicle is used over 50% for business purposes. Smaller vehicles may still be depreciated, but there is a lower total limit on the deduction value for the year for vehicles.
Purchase other Fixed Assets
If you already plan to buy equipment or other fixed assets, your business may be eligible to make a section 179 election to expense up to a total of $500,000 of equipment in 2016. Once more than $500,000 of equipment or fixed assets are acquired, the deduction begins to phase out.
Bonus Depreciation for new Equipment
Bonus depreciation of up to 50% of the asset value can be deducted as first year bonus depreciation qualified property put into service prior to year-end.
De Minimus Safe Harbor Election
The tangible property regulations allow for a de minimus expense safe harbor that allows for an annual deduction of $2500 for materials and supplies in 2016 for taxpayers without an applicable financial statement (AFS). The individual purchases deducted may not exceed the $2500 to qualify for this election.
The income tax return due dates for C Corporations and Partnerships change this year. The new return due dates will generally be as follows:
Type of Return New Due Date Calendar Year Due Date
C Corporation On or before the 15th day of the FOURTH month after April 15th
the close of the corporation’s tax year
Partnerships On or before the 15th day of the THIRD month after March 15th
the close of the partnership’s tax year
S Corporations On or before the 15th day of the THIRD month after March 15th
the close of the S corp’s tax year
Tax Exempt On or before the 15th day of the FIFTH month after May 15th
the close of the Org’s tax year