Don’t let the April 15th rush to prepare and file your taxes cost you unnecessary money. By taking time to explore tax reduction tips, you can file on time and still keep more of your hard earned money.
Small Business Pension Plan Tax Credit
If your small business employs fewer than 100 people, you can claim a tax credit of $500 for each of the first three years after the implementation of an employee pension plan. Tax credits are more valuable than deductions because they directly reduce the net taxes you owe instead of reducing your gross taxable income. Establishing a pension plan can increase employee retention and help your bottom line come tax time.
You can claim up to 50% of eligible start up costs incurred in every one of the first three years of the plan. Additional costs that are eligible to be claimed for this credit are any retirement planning education that you provide for your employees.
If you spend $2000 establishing an employee pension plan in 2004 and $1500 a year maintaining it for the next two years, you will be eligible to claim a $500 tax credit for each of the three years. The tax credits you receive over the life of the three year credit are enough to fund the plan for one year.
Personal Business Loans
Make sure you keep your personal money separate from your business money. Many owners make personal loans to their business, but do not keep correct records. By inaccurately counting loan proceeds as business proceeds they incorrectly inflate gross revenues, costing them money in unnecessary taxes. Review past tax records to make sure that this is not a problem for you. Separate personal and business credit cards can help keep spending separate and can save you money.
You Can Still Claim the SUV Deduction
Originally, the “SUV Deduction” allowed the owners of SUVs over three tons to deduct up to $100,000 of the price of their vehicle. Despite popular belief, the American Jobs Creation Act did not do away with this deduction, but it has been chopped by three quarters, down to $25,000. The remaining $75,000 is allocated to depreciation of the vehicle. While not as large a deduction, it is still large enough to have a significant effect on your taxes. You are not limited to the $25,000 deduction is you purchased a 6,000 pound vehicle that is not classified as an SUV.
Sales Tax Deductions
You can deduct state and local sales tax or you can choose to deduct your local and state sales tax. This tax deduction can result in significant savings if you live in a state that does not collect income tax. If you have questions about this deduction, see IRS Publication 600.
Discrimination Lawsuit Cost Deductions
The deduction for discrimination lawsuit costs is available if you lad to be lawyer’s fees and court costs after being sued for discrimination. The Alternative Minimum Tax does not limit your ability to claim this deductions.