Christmas is over, but small business owners should still be shopping – for themselves. You only have a couple of business days left in 2012, meaning there are only a couple more shopping days for gifts that you can buy for your business and then write them off as expenses for tax purposes. It may sound like gaming the system, but certain purchases will provide indisputable value and growth to your business in the year to come. It just happens to be an added bonus you can write these purchases off on your 2012 taxes.
In fact, the impending “fiscal cliff” situation makes this year a particularly important time to splurge on a year-end wish list for your business. Tax laws are likely to change, whatever the resolution of the so-called “fiscal cliff” scenario. Certain financial maneuvers in the final week of 2012 can lower your tax exposure when you submit your 2012 taxes and take clever advantage of changes to the tax code.
The fiscal cliff is looks likely to result in some form of tax increase -- an average of $3,500 per household if there is no resolution deal, according to the Tax Policy center. A common way to lower your exposure to a tax increase is called accelerating income, basically moving money around in ways that would be taxed higher if you moved it after Jan. 1, 2013. The savings can be substantial. Let's look at a few ways to accelerate income, or items to buy your business in 2012 to write off and save money on your taxes.
How to Accelerate Income Before Jan. 1, 2013
Accelerating income can boil down to just selling stocks or investments on which you gained this year. These transactions will likely be taxed at a much lower rate if performed during calendar year 2012. If you're a business owner, giving stock options or investment awards to your employees will similarly be taxed at a much lower rate before the clock strikes midnight on Jan. 1, 2013. Some capital gains rates are currently taxed at zero percent but will be taxed at a more substantial rate if cashed in during 2013.
Buy Your Business a Computer
If you've been wanting additional laptops or tablets for yourself or employees, now is a great time to buy them. The post-holiday deals are good and the expense can be written off for 2012 as long as these computing devices are used primarily for your business.
Buy Your Business a Printer or Furniture
The same goes for printers, fax machines and furniture. Completing these purchases during 2012 allows you to write them off on your coming taxes.
Entertain Clients or Employees
You have to conduct some form of business during or after the meal or entertainment event, but these are tax-deductible. Realize, though, that meals and entertainment are only a 50 percent deduction, not the full 100 percent.
Pay Old Bills
You can deduct the payment of any invoice on the day you cut the check. You need to eventually pay those bills anyway and paying them before or on Dec. 31 provides the double advantage of clearing debt and lowering your 2012 tax exposure. You'll enjoy New Year's more with cleaner books.
Contribute to Your Retirement Fund
Buy yourself a Christmas present and write it off at a lower rate than you'll be able to, say, next week or anytime beyond. The larger your contribution to a retirement fund, the more you'll be able to write off on this year's taxes. Any revenue you dump into your 401(k) is unlikely to be taxed if you do it before 2013.
You may know the feeling of doing your business' taxes and wishing you'd splurged on a few more useful write-offs. This may be the last year when the write-offs can be implemented as favorably, so bust out the checkbook and write yourself some tax write-offs. This article is part of the Drive Your Business Forward series. Check out allvoices.com/smallbusiness for more tips and advice on how to succeed as a small business. This series is supported by Mercedes-Benz Sprinter.