Year-End Tax Tips
We're into the home stretch of 2007, and along with our Best Wishes for the Holidays, we offer this advice; bolster your position with regard to 2007 taxes, and thoughtfully plan your tax strategy for 2008. Standard
year-end wisdom applies; make deductible purchases before year's end, and if possible, defer receipt of income
until after the new year commences. Other not-so-standard issues exist in the US tax code, so please read further.
Note that this isn't a complete list of possible deductions, and the suggestions given do not constitute legal or accounting advice. We recommend that you consult qualified tax attorneys and certified public accountants for final judgement on tax-related matters. That
said, here's our list of important year-end tax considerations for US businesses.
Business Deductions
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Section 179
If you've started a business in 2007, then look carefully at Section 179 of the Internal Revenue Code. Section 179 allows a deduction of up to $108,000 if your business spent less than $430,000. Deducted expenses of course must be allowable.
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Mortgage interest
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Business loan interest
Generally, you should be able to deduct interest on debts related to your business.
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Rent
Business rents are generally deductible in the year they are paid.
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Vehicles
If you use the 2007 standard mileage rate deduction ($0.485 per mile), document the daily miles driven for work versus personal miles. The other method is to deduct actual automobile expenses,
like gas, tires, repairs, registration and insurance.
Direct tax credits are available for original purchasers of certain hybrid vehicles.
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Office equipment purchases
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Office equipment depreciation
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Employee compensation
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Home office usage
A home office needs to be used for business purposes only. The deduction is based on the percentage of floor
space in the home used by the office.
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Insurance
Business insurance and bond costs. Percentages of auto and homeowners insurance may also be deductible.
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Legal, tax prep, professional training and membership costs
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State & local property taxes
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Business travel
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Business entertainment
At best you're allowed a 50% deduction from these costs. The question to ask in order to determine whether or not an
entertainment expense is deductible is 'did a substantial business discussion occur?' Be ready to document
such expenses with dates, names of associates and, of course, receipts.
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Energy efficiency tax credit
If you installed energy-efficient windows, furnace, fan or photo-voltaic solar cells in 2006 and/or 2007, you
could be entitled to a tax credit from the IRS. Note that items "must be placed in service after Dec. 31, 2005
and before Jan. 1, 2008".
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Pre-pay business subscriptions, equipment maintenance contracts, or business travel arrangements.
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Inventory write-offs
Check your inventory for damaged or useless items; you may be able to deduct the drop in their fair market value.
Personal Deductions
Mortgage interest is still your single best deduction.
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New hybrid vehicle
Purchasing a new hybrid vehicle may entitle you to a tax credit, as above.
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Cafeteria benefits
Be sure to extract and use any pre-tax money placed in cafeteria-benefits programs. That cash is strictly 'use it or lose it'.
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Maximize contributions to retirement accounts. Check with your accountant regarding your maximum
allowable contribution to your IRA or Keogh.
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Sell losing stocks to offset gains from winners.
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Installation of energy-efficiency measures may get you a tax credit.
On Your Own, Tax Prep Software or Accountant?
If you're confident in your knowledge of 2007 tax law, you may want to do your own taxes. You also may choose to purchase and use off-the-shelf tax preparation software to prepare your returns. But if you want that safe, warm feeling you get when a CPA reviews your finances and makes recommendations for your tax returns, then see your accountant.
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