Drive more savings to your business with the heavy SUV tax break
Are you considering replacing a car that you’re using in your business? Consider a heavy SUV, pickup or van because the caps on annual depreciation and expensing deductions for passenger automobiles don’t apply to them. SUVs rated at more than 6,000 pounds gross (loaded) vehicle weight qualify. In most cases, you can write off the entire cost of a new heavy SUV used entirely for business purposes as 100% bonus depreciation in the year it’s placed in service. Even if you elect out of bonus depreciation for the heavy SUV, you can elect to expense under Section 179 the cost of an SUV up to $25,900 for 2020. The remainder is depreciated under the usual rules. Other limitations may apply.
Paycheck Protection Program (PPP) Year End Updates
IRS Issues Guidance Tax Treatment of PPP Covered Expenses
New Potential Legislation Could Be Imminent By Weeks End
Maximize your 401(k) plan to save for retirement
If your employer offers a 401(k) or Roth 401(k) plan, contributing to it is a smart way to build a substantial nest egg. If you’re not already socking away the maximum allowed, consider increasing your contribution. With a 401(k), an employee elects to have a certain amount of pay deferred and contributed by an employer on his or her behalf to the plan. The contribution limit for 2020 is $19,500. Employees age 50 or older by year end are also permitted to make additional “catch-up” contributions of $6,500, for a total limit of $26,000 for 2020. The IRS recently announced that the 401(k) contribution limits for 2021 will remain the same as they are for 2020.
The QBI deduction basics and a year-end tax tip that might help you qualify
Are you eligible to claim the qualified business income (QBI) deduction? Taxpayers other than corporations may be entitled to a deduction of up to 20% of their QBI. For 2020, if taxable income exceeds $163,300 for single taxpayers, or $326,600 for a married couple filing jointly, the QBI deduction may be limited in certain cases. Taxpayers may be able to save taxes with this deduction by deferring income or accelerating deductions at year end so that they come under the dollar thresholds (or be subject to a smaller phaseout of the deduction). You also may be able to increase the deduction by increasing W-2 wages before year end. The rules are complex so consult with us before taking steps.
Should you add a technology executive to your staff?
Today’s businesses need to wield robust IT systems, digitally interact with customers and vendors, and use tech to spot upcoming trends. That’s why many companies hire a technology-focused executive such as: 1) A Chief Information Officer who manages internal IT infrastructure and operations, 2) A Chief Technology Officer who focuses on external processes and oversees development and production of tech products or services that will increase revenue, and 3) A Chief Digital Officer who looks for new markets, channels or opportunities. These positions call for major expenditures in hiring, payroll and benefits, so it’s important to thoroughly explore their feasibility. Our firm can help.
Family business owners must weave together succession and estate planning
For family business owners, among the most important issues to address is how to best weave together a succession plan with an estate plan. Transferring assets to the younger generation as early as possible removes future appreciation from your estate, minimizing any estate taxes. But you may not be ready to relinquish control of the business or your children might not be prepared to run it. To address this quandary, you can establish a family limited partnership or transfer nonvoting stock. Another challenge is older and younger generations may have conflicting financial needs. Solutions here may include conducting an installment sale or setting up a trust. Contact us for more information.
Steer clear of the wash sale rule if you’re selling stock by year end
Are you thinking about selling stock at a loss to offset gains that have been realized during 2020? If so, it’s important not to run afoul of the “wash sale” rule. Under this rule, if you sell stock or securities for a loss and buy substantially identical stock or securities back within the 30-day period before or after the sale date, the loss can’t be claimed for tax purposes. The rule is designed to prevent taxpayers from using the tax benefit of a loss without parting with ownership in a significant way. Note that the rule applies to a 30-day period before or after the sale date to prevent “buying the stock back” before it’s even sold. We can answer any questions you may have.
Small businesses: Cash in on depreciation tax savers
The Section 179 deduction provides a tax benefit to businesses, enabling them to claim immediate deductions for qualified assets, instead of depreciating them over time. For 2020, the maximum deduction is $1.04 million, subject to a phaseout rule if more than $2.59 million of eligible property is placed in service during the tax year. Even better, the Sec. 179 deduction isn’t the only avenue for immediate tax write-offs for assets such as machinery and equipment. Under the 100% bonus depreciation tax break, the entire cost of eligible assets placed in service in 2020 can be written off this year. Contact us if you want more details about how your business can make the most of the deductions.
Lessons of 2020: Change management
The year 2020 has taught businesses many lessons. In the broadest sense, the COVID-19 pandemic and resulting economic impact have meant one thing: change. Thus, one lesson learned (or reinforced) is the importance of change management. This is a formalized approach to providing employees the information, training and ongoing coaching needed to successfully adapt to any modification to their day-to-day jobs. Workers often think that change compromises job security or status, while management may find resistance to change frustrating. Companies can avoid these negatives, and the resulting drops in productivity and morale, through carefully executed change management. Contact us for more info.
Employees: Don’t forget about your FSA funds
Many employees save taxes by placing funds in their employer’s health or dependent care flexible spending arrangements (FSAs). It’s a good time to review 2020 expenditures and project amounts to be set aside for 2021. A pre-tax contribution of $2,750 to a health FSA is permitted in 2020. To avoid forfeiture of your health FSA funds because of a “use-it-or-lose-it” rule, you must make eligible medical expenditures by the last day of the plan year (Dec. 31 for a calendar year plan), unless the plan allows an optional grace period. Like health FSAs, dependent care FSAs are also generally subject to a use-it-or-lose-it rule. Other rules and exceptions may apply. Contact us with any questions.