Tax Planning for Small Business

Business Start-up Costs:

Costs associated with starting a business such as market surveys, hiring and training employees, traveling to line up vendors, etc. can provide you with a tax benefits if proper election to amortize such expenses is made one the new business is operation.

Such expenses, like organization fees, can be amortized over 5-years; otherwise, these costs are capitalized.

Section 1244 Stock:

Mitigate the loss risk associated with starting a new venture by considering Qualifying stock issued by your C-Corporation as “Section 1244” stock.  Section 1244 Stock enable you to:

Deduct future losses on your stock as ordinary losses; to a maximum of $50,000 ($100,000 on joint return) rather than capital losses which are limited to $3,000 per year against ordinary income ($1,500 for married filing separate return). Read More about Section 1244 Stock.

Use of Personal Property for Business

Such as the use of personal vehicle, computer, tools, etc. Such use must be properly documented. For the use of vehicle records on actual expenses and mileage must be kept. The amount of allowed depreciation may be limited under the “Luxury Car” rules; however, certain heavy vehicles (such as large SUV) are not subject to “Luxury Car” rules.    

Use of Foreign Free Trade Zones:

Several countries around the world offer incentives and tax-free operations to businesses operating in free trade zones. Such operations can provide significant savings, particularly to manufacturers. Residency in a foreign country would qualify a US taxpayer to Foreign Earned Income Exclusion of $80,000 per year ($160,000 for married couple filing a joint return.) For a matter of fact, some countries have no income tax laws, and offer Tax-Free income for all earnings.   

Tax Credits for Business:

Established businesses can take advantage of several available tax credit to improve work conditions, attract and maintain workforce while attain tax benefits. Such credits include:

Employer-Provided Child Care:

Employer can receive up-to $150,000 tax credit for Employer-Provided Child Care. This credit is given in two-parts: 25% of expense to buy, build, rehab, or expand property that will be used for Employer-Provided Child Care facility, and 10% of the amount paid under contract to provide child care resources and referral services to employee

Qualified Retirement Plan:

Your business may deduct the contributions it makes to qualified plan on behalf of yourself and employees within limits. Plan participant don’t include contributed amounts on their income until they receive contribution from the plan.

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Last modified: February 19, 2007