- Buy equipment this year. For 2011, the maximum 100 percent deduction of equipment under Section 179 is $500,000. This is scheduled to be reduced to $125,000 for 2012. There is also a bonus 100 percent depreciation on new equipment (not used) that will be in place for both 2011 and 2012.
- Write off your bad debts. If your business uses the accrual method, you should write off any receivables that you deem to be uncollectable. Document your good-faith efforts to collect these debts. Remember, if you later collect an account that you wrote off, you will need to pick up the total amount as income.
- Write off old inventory. Review your inventory and mark down old inventory to market value. Research what you could sell it for on the Internet. (Better yet, sell it at a deep discount. Better some cash than just throwing it away!)
- Donate old inventory. Better even than throwing away old inventory – donate it. You will be able to deduct an amount equal to ½ the difference between market and the product cost. Assume you normally sell your product for $100 and it costs you $50. Your deduction would be $75.
- Prepay 2012 expenses in December. Pay property taxes in December rather than January. Pay your January 2012 rent or building payment in December. Look for other expenses that you can pay early. If you are short of cash, charge it to a credit card. Even if you are on a cash basis, you can deduct these expenses in 2011.
- Donate computers and other equipment you no longer use. You can write off one half of the difference of the fair market value less your remaining basis (original cost less depreciation). Since most of the equipment you replace is likely to have been written off, your charitable deduction will most likely be half of the market value. Take digital pictures to prove the deductions and keep proof of what you could have sold the equipment for at the time of the donation.
- Look into creating a retirement plan. The vast number of tax deductible retirement plan options makes this a subject that is well beyond the scope of this blog. Call your CPA for more information on how this can help you.
7.5 Check out my Facebook page for daily tax savings tips that we have been posting since 10/21/11 (http://www.facebook.com/#!/pages/Wayne-J-Belisle-CPA/185259446999).
Like any good CPA, I need to add a disclaimer: Unfortunately, it is impossible to offer comprehensive tax info over the Internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.