Posted on January 29th, 2023.

The Internal Revenue Code provides a wide range of tax-saving options, encouraging business owners to invest in their companies and create jobs.

Spending money just to lower your taxes is not something we advise. However, making wise purchases is probably in your best interest. Here are a few well-liked methods for reducing your tax obligations and making savings for your company.

Tax Credits

Tax breaks and credits provided by the federal government encourage business owners to take actions that boost the health of the American economy as a whole. Employer-friendly actions include hiring staff, making accessible environments for people with disabilities, switching to emissions-free technologies, and even providing health insurance for staff.

Deduction for Qualified Business Income (QBI)

Depending on whether your company is an S-Corp, a partnership, or a sole proprietorship, you may be able to deduct 20% of the QBI. This deduction is in addition to the business expenses you typically deduct. If your taxable income is less than $157,500, you might be eligible. If you and your spouse file a joint return, and write them off in order to reduce this year's tax liability, the last quarter is the ideal time.

Eliminate bad debt

Sadly, some clients may never pay for the items they ordered on a note. To reduce this year's tax liability, now is the ideal time to locate those receivables and write them off.

Create and Fund a Retirement Plan (for You and Your Employees)

Up to a certain amount each year, contributions to investment retirement accounts like 401(k)s and 403(b)s exempt you from paying taxes. Until you withdraw it, the portion of income that is put into an IRA is typically tax-free. To make sure you are eligible, think about speaking with a tax advisor.

Depreciation bonuses and Section 179

Equipment, vehicles, and other assets used in a business may be eligible for a Section 179 deduction. This section of the IRS Code enables your company to deduct the cost of the equipment in the first year by up to $1,040,000. Until you earn $2,590,000 for the year, you may benefit from this rule.

A tax reduction of 50% to 100% on equipment costs is also provided by the additional bonus depreciation.

Up until January 1, 2023, bonus depreciation regulations will be in effect.

Please be advised that in order to qualify for these tax benefits, you must begin using the newly purchased equipment by December 31.

Note

The tax breaks described in this article might also be subject to additional limitations. Consult your tax advisor to determine your eligibility.

We Are Here to Help

Equipment leasing options are available from MCS Capital and are Section 179 tax-deductible.