Small Business Tax Deduction Strategies #4
Focus on constructive dividends
When a small business corporation is successful, it may pay out dividends to its shareholders, including the owner running the company. Although dividends paid by C corporations are taxable to the extent of the company’s earnings and profits (a tax term of art), they generally are eligible for preferential federal income tax treatment, just like long-term capital gains. Currently, the top federal rate on qualified dividends received by an individual taxpayer is 15%, or 20% if you’re in the top rate bracket.
Conversely, compensation is taxable to recipients at ordinary income rates, but these amounts are deductible by the company. Dividends are not deductible. For this reason, C corps usually prefer for payouts to shareholder-employees to be treated as compensation rather than dividends.
Small Business Tax Deduction Strategies #5
Nail down casualty loss deductions
At this time of year, taxpayers throughout the country are at risk for various types of natural disasters, including hurricanes, tornadoes and wildfires.
Strategy: Keep detailed records if your personal (nonbusiness) property is damaged or destroyed. Although it is small solace, you may be able to claim a casualty loss deduction on your tax return.
Small Business Tax Deduction Strategies #6
Score tax breaks for business meals
A new decision made in favor of a hallowed professional hockey team may lead to tax breaks for employers of all stripes.
Strategy: Furnish meals to employees when it suits your business purposes. If certain requirements are met, the meals are tax free to the employees as a fringe benefit and deductible by your company.