Businesses looking to reduce their income tax expense for this year need to implement tax planning strategies now. With 2013 rapidly drawing to a close, have you developed a proactive tax plan to reduce your tax expense?
In order to maximize the tax benefits available, you should consider two general strategies:
- Use of traditional timing techniques for income and deductions; and
- Use of tax incentives scheduled to expire at the end of 2013.
Timing techniques involve the process of voluntarily choosing when to earn income or incur expenses. Many businesses annually opt to use bonuses, retirement contributions, repair and maintenance projects, etc. to reduce taxable income. If taxable income is down in a particular year, management can choose to eliminate the voluntary expenses or delay the decision until the following tax year.
Tax incentives used to reduce taxable income generally involve accelerating the expense of capital expenditures or incurring an expense for a specific reason. Some of the tax incentives setting to expire at the end of 2013 include:
- Capital expenditures up to $500,000 placed in service during 2013 are eligible to be considered an expense under Code section 179. This tax expense limit plummets to only $25,000 in 2014.
- Capital expenditures on qualified property are eligible for 50% bonus depreciation in 2013. This accelerated depreciation option expires at year end leaving no benefit in 2014.
- Work opportunity tax credits for new hires from targeted groups (e.g., veterans, recipients of government assistance, etc.) expire at the end of 2013. Hiring employees from the specified groups before the end of 2013 could result in a credit of up to $6,000.
To reduce your income tax expense for 2013, your business needs to act now. Developing a plan on the timing of voluntary expenses and taking advantage of tax incentive programs can significantly reduce your 2013 tax expense.
Contact Flexible Accounting Services of the Triangle today so we can help you develop a tax planning strategy that will reduce your income tax expense.