As the year comes to a close, both personal and business taxpayers can benefit from last-minute tax-saving opportunities. These five tax breaks can help you minimize your tax bill even if you haven’t given much thought to tax planning throughout the rest of the year.
Pay Your Bills Ahead
Making next year’s state and local tax payments as well as mortgage payments can allow you to take advantage of those deductions now. Keep in mind that this only applies to payments that are due within the next tax year.
Buy Business Equipment
Making timely purchases of depreciable property such as computers and software, equipment, tools and necessary furnishing such as shelving and storage items can qualify for up to $510,000 in deductions in the same year that it was purchased. These purchases can also qualify for the 50 percent bonus first-year depreciation deduction, providing additional savings. Waiting until the end of the year to make new business-related buys can allow you to quickly recover much, if not all, of the costs, making these purchases virtually painless.
Buy a Vehicle
Purchasing a car, truck or boat at year-end can result in significant savings on your tax bill, especially if you’re in a state that doesn’t charge income tax. This is because the IRS has rules in place that allow taxpayers to offset their federal tax liability with either their state income taxes or sales taxes. Without state taxes to deduct, a large purchase such as a car can result in sales taxes that can then be deducted. Even if your state does collect income tax, you can still gain a valuable tax credit by purchasing a qualified hybrid vehicle.
Business filers can take advantage of the Section 179 deduction as well as Bonus Depreciation for vehicles, which allows business owners to deduct up to $11,060 for cars, $11,160 for trucks and vans under 6,000lbs and $25,000 for SUVs and crossovers between 6,000lbs and 14,000 lbs. The vehicle must be used for business 100% of the time to take advantage of this deduction.
Donate to Charity
Businesses can donate unused inventory as well as supplies, property and, of course, cash. This can free up storage space and ensure that items don’t go to waste. You can also provide a scholarship via a 501(c)3 non-profit organization, which can allow you to promote education and provide resources to individuals in need while also gaining a valuable tax deduction.
Consult a Tax Professional
While there are a number of do-it-yourself software solutions and online programs, an experienced tax professional can ensure that you don’t miss any of the more-obscure deductions and credits. A tax pro can also help you avoid bad math, improper filing and other costly mistakes.