In this week’s tax segment, we’re beginning a series on tax planning for your business. We know you’ve probably just filed your taxes, or maybe even extended, but because we are a planning and leadership firm, we’re really big on tax planning as a part of overall planning. It’s something you really need to focus on if you’re going to get control of your business cash flow. So we’re starting a series today on tax planning strategies for your small business, because the time to think about taxes is always NOW. You leave the filing of taxes to accountants because that’s history. It’s already been done. But as a leader you need to be focused on what’s in the future! And taxes have something to say about everything that you’re doing in your business. You need to be tax wise.
One of the things we want to talk about today is being proactive about procurement and your depreciation expense. Maybe you need to buy a large machine. Maybe it’s a $100K machine, some sort of earth moving equipment, a printing press, an oven, even a server vault… as part of the process of doing this analysis, you need to think about the impact this is going to have on your tax situation. Depending on your situation, maybe you should lease this equipment. Maybe you should buy it in December rather than in January, so that you can depreciate it. Maybe you need to be deciding at the time that you purchase it which depreciation time frame is applicable, and can you get aggressive on that? Can you use a shorter time frame if necessary. Or to maximize deductions you need to defer the expenditure. Maybe it’s a lease-purchase. Taxes have a large role to play in that purchase decision.
There are also business tax credits, and it’s not just federal income taxes but state as well. Because your state may, for example if you’re involved in the film industry, be trying to attract more businesses like yours, so they may be offering some very attractive credits available to you. In Canada, they’re practically paying you to make your film there. Your cost actually becomes a revenue center in some situations.
Taxes have everything to do with everything in your business. That’s the point of our tax planning series! So today we’re focusing on procurement (purchasing) and how it relates to depreciation. We still have several attractive asset expensing rules in play, especially with the pandemic, so it could be that you can write it off all in one year.
Check out these articles from delrealtax.com, USchamber.com, and LakeWylieTax.com to learn more. This is the type of thing we can help you with in conjunction with your tax advisors! We’d love to help as that rolls into your strategic plan. Let us know if we can help you! Reach out. Give us a call.