End-of-Year Tax Strategies for Small Businesses
Tax time comes but once a year and, for small businesses, it’s time to maximize those tax deductions. Your accountant can help, but you can
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take charge of your tax savings with a few simple strategies.
Accuracy counts
Your records should be accurate and up-to-date. Understanding the financial condition of your business will help you assess the feasibility of the tax strategies that are available.
Pay yourself first
Make the maximum contribution allowed by law to a retirement plan like a 401(k), KEOGH plan, Roth IRA, or SEP. A financial planner or your accountant will be able to guide you to the best option for your business.
Share and share alike
Charitable contributions are good for the recipient, the heart, and your business. Be sure to get a receipt for your donation.
Buy, buy, buy
Stock up on office supplies, pay all of your monthly bills, and pre-pay all the business expenses that your financial position will allow. If your business is typically busy during the first quarter, buy the goods and services now that you would normally purchase after the first of the year.
Write it off
While doing year-end inventory, look for goods that have been damaged, are obsolete, or have lost market value. Depending on your accounting method, these losses can provide additional deductions.
Don’t take the money
Receipt of payments for goods and services that are deferred until after January 1st won’t be taxed until the following year. This strategy can save you tax dollars if your cash flow can weather the deferral.
As with all tax deductions, the legal structure and type of business will dictate the allowable adjustments to your bottom line. By taking advantage of available tax strategies, you can reduce your taxes and keep that money flowing in your business.
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Go Green and Save Money
Do you know what the phrase “go green” means? This is simply taking on energy-efficient habits in order to be environmentally friendly. The
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government is now encouraging taxpayers to take on these habits by offering incentives to do so. Please see below if you are looking to take advantage of these credits and deductions.
Improvements to your home.
Upgrading your home to use solar or wind energy is not the only way to make your home green. By choosing wisely when making decisions on new appliances such as a new air-conditioning, your home can become more energy efficient and you could be eligible for a tax break.
Upgrade your vehicle.
By purchasing a more fuel-efficient car you will not only be saving money on gas, but you might be able to take advantage of a federal tax credit. To receive the top amount of the tax break, your new hybrid must be within the first 60,000 sold. There will also be a lesser tax break available until the time that the offer expires. This offer can allow you to obtain a substantial savings on your new car.
Renovate your home.
Major renovations such as installing solar energy, wind energy and geothermal heating can allow you to gain up to 30 percent in tax credits per installed item. The tax credits could be quite large, thus reducing the amount of the renovations greatly.
Building a new home.
Renovations are not the only way to obtain tax credits in a home. Home builders can receive $1,000 in credits by building a home that is over 30 percent more efficient than minimum standards, and $2,000 if the home is 50 percent more efficient.
As you can see obtaining tax credits is just a matter of making decisions that are more informed and energy conscience.
Federal Income Tax Tips
Although everyone with a job is required to pay their taxes by April 15th, there are a few things that you can do to help with IRS Tax Problems.
If you are working on student loan repayment, paying off your home mortgage, or donating to a non-profit organization, you may qualify for a tax break. If you do claim any tax write-offs upon filing your 1040 form, it is vital that you keep a copy of every document you are using as proof of a write off.
Student Loan Debt
The only part of your student loan debt that can be written off in taxes is the interest upon which you have already paid. However, you may not be able to get the tax write-off unless your gross income after paying on the student loan interest averages out at $70,000 or less. It is then added on to the rest of your Schedule A deductions if this is what you are using.
Home Debt
If you are paying off your mortgage, your lender will total up the amount of interest you have paid and provide you with a 1098 form. This will allow you to add your paid mortgage interest to any other tax deductions you have in order to create a deduction total that is higher than the standard amount.
Charities
Donations to charitable, non-profit organizations are also tax deductible. You must file a 1040 and Schedule A form. The charity will keep a running list of the donations you make on a yearly basis. At the end of the year, you will receive a statement summarizing all your donations so you can write them off in your tax deductions.
Teresa is an accomplished business owner. Her company assists people with help in payroll Tax Problems. To find more information on wage garnishment, audits and settling back taxes visit http://www.toptaxdefenders.com.
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How to Calculate Property Taxes
Setting aside enough money to pay your annual property taxes can sometimes be challenging. In order to know how much you need to save, you should calculate a rough estimate of your taxes ahead of time. In order to be completely accurate in your calculations, you first need some crucial information about your property and your local rate of assessment.
1. Assess Property Value
One of the most important things you need to know is how much your property is worth. That means calculating both the value of the land your property is on as well as the value of the building. This number is not based on what you paid for it but rather is based on what your tax assessor deems as its overall value. Add both the value for the land and the building together and you will get the total value.
2. Learn about Local Tax Rates
If you have access to your state’s government website you can log on to discover what the projected property tax rates are for your area.
3. Tax Exemptions
You may be able to get tax exemptions on some parts of your taxes if you are disabled, over 65 years of age, or are widowed. Of course, this does not apply in every city or state, so check with your local government for more information. Then you subtract your total tax exemptions from your overall tax number.
4. Do The Math
Multiply this new number by the annual property tax rate for each tax district. Add up all the amounts to discover the total you will need to pay that year.
It is generally a good idea to set aside more money than you think you will need to be on the safe side.
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How to Lower Your Property Taxes
Lowering your property taxes can appear to be a very daunting task, but it doesn't have to be. First, know how the taxes in your area are
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calculated. Some places take a percentage of the value of your home, others use a system based on how much it would cost to rebuild your home. Every county has their own way of calculating tax, so be sure to ask how it's done in your area. You can find out by contacting your local tax assessor's office and asking them.
Once you know how the taxes in your area are calculated, you can then ask for the evidence that they used to reach the dollar figure in your bill. Gather the evidence and then check it for errors. Make sure the lot size is right, the description of the property is correct and the square footage is accurate. When the tax assessor reassesses the value of your house, he does it from the street, so inaccuracies are a possibility.
After checking that the tax assessor's information is correct, it's time to build your case. Gather up the evidence that supports your view of how much your property is worth by comparable houses to yours. For this, you will need the help of a real estate agent. Your agent can research the comparable properties in your area, usually for a small fee.
Now you've got your case ready, it's time to contest your liability. Your specific tax office will have different procedures for how you can contest your property value. Be sure you read all the instructions carefully and if you do not understand something, ask the information desk in the tax assessor's office. Keep an eye on deadlines because some offices have very short rescheduling windows if you miss an appointment.
Remember, getting your property tax liability lowered isn't impossible and it isn't designed to confuse you. It just seems that way. Take your time reading all the information that the county provides to you and ask questions if you don't understand something.
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Property Tax Myths
No matter where you live, property tax myths seem to be a common problem. To keep the myths separate from the truths I have listed 6 of the
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common myths below.
Myth #1: The Assessor Sets your Taxes
This is false. The only job that an assessor has is to determine is the value of your property, including the land and buildings. You then multiply the value of your property by the local property tax rate to determine what you will pay. Only your city or state government has the authority to set tax rates.
Myth #2: High Assessments Equals High Prices
Property tax prices are not always high because the assessment value of your house is high. It depends more on the overall property tax rate each year. Even those with low assessment values pay high property taxes if the tax rate is high. As the property tax rate lowers it will create a lower property tax for you.
Myth #3: State Government Raises Property Taxes to Increase Revenue
The state does not benefit from your property taxes in any way. These are only used as sources of revenue for your particular area. In fact, most of what you do pay goes to support schools.
Myth #4: My Equalization Rate can improve my Inaccurate Assessment Rate
An equalization rate is simply the number of assessed properties and their value compared with their actual market values. They make district wide assessment rates accurate, not individual ones.
Myth #5: The Current Tax Rate Determines the Future
Even if your property tax bill is high, that doesn’t mean rates are on the rise. Your bill could stay the same for many years depending on the current trend of property values.
Myth #6: An Assessment Cap Lowers Your Taxes
An assessment cap simply ensures that rates don’t increase over a certain percentage annually. However, some properties are assessed higher than others, so those with a higher assessment may pay higher taxes.
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Anastacio is an accomplished attorney and business owner. His company helps home and business owners appeal property taxes in Houston and the surrounding counties. For more information on how you can lower your property taxes visit http://www.republicpropertytax.com.
Are Property Taxes Deductible?
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Taxes on real estate can be deducted if the tax is both based on the assessed value of the property, and the tax is utilized for public consumption. Deductions cannot be made if the tax is not uniform, meaning property owned by various individuals in the same jurisdiction are given different tax rates, or if the money given for the tax is used for a specific need of the taxed individual.
Deductions for Newly Acquired Real Estate
When real estate is purchased, taxes are divided during that year so that the seller pays taxes on the property through the date of sale, and the buyer pays taxes for the remainder of the year. Each party may deduct only the amount of property taxes that they paid for that year.
Real Estate Tax Refunds
An individual who pays real estate taxes and received a refund in the same year as taxes are being filed must reduce the amount of real estate taxes being deducted by the amount of the refund. If the refund or rebate is for a previous year's real estate tax, that amount must be claimed as earned income and is taxable by the IRS.
Local Benefits
Improvements made to the property that benefit the general populace, such as the building of sidewalks, streets, and sewage systems, may not be deducted if they also increase the value of the property in question. Contrarily, taxes for maintenance and repair to those improvements may be deducted with adequate proof.
Cooperatives
The IRS has special rules for owners of cooperative apartments. Most of the above rules apply, the cooperative owner can only deduct real estate taxes if the corporation has only one class of stock outstanding and if none of the stockholders receive a portion of the funds acquired. Also, if at least 80% of the corporation's gross income was paid by tenants, eighty percent or more of the property is available for use by the tenants, or at least 90% of the expenses were used for management and care of the property, real estate taxes may be deducted.
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How To Make the Most Out Of Your Property Tax Deduction
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Whether you are filing your tax return yourself or having them done for you by a professional, it is important to understand the basics. This will help you to know what documents you will need to take to your tax office. Many people are intimidated by tax returns and are afraid they will not complete their return correctly. If you can follow instructions and research IRS publication, filing your tax return really is not that hard.
What are Property Taxes?
Property tax is assessed against all property owners. I consider it a utilitarian tax since its purpose is to provide your local area with money to handle services that benefit your community as a whole. The amount you pay is computed and collected by your local tax assessment office. It can be paid each month on top of your mortgage payment (collected in escrow) or you can choose to pay the full year of tax in one lump sum.
Itemized Deduction versus Standard Deduction
Tax deductions will decrease the amount you may owe the IRS. The IRS sets a specific amount for standard deductions or you can choose to itemize your deductions. Homeowners should complete the itemized deduction section of their tax return to see if the amount is greater than the standard deduction. Your deductions decrease the amount of your taxable income and may mean the IRS will owe you a tax refund. All items that qualify as tax deductions are listed in Topic 503 from the IRS.
Are Property Taxes Deductible?
The short and simple answer is as long as you itemize your deductions, the property tax you paid in the year you are filing your tax return is deductible. Home improvement that increases the value of your property and depreciation also qualify as tax deductions.
If your itemized deductions work out to be more than the standard deduction, use the itemized amount to optimize your refund or decrease what you owe the IRS.
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Ever Wonder How They Come Up With Your Property Taxes?
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There is another number on the form, which is your property tax or local tax. Some may not realize it, but that number is also tax deductible, right off the top. It is very important that you exercise your right to take this tax off your income when filing. Otherwise you will be paying double taxation, which is against the law. That's not to mention it is costing you money unnecessarily. You know you don't want to do that. (You can also appeal property taxes if they're too high).
So how do they come up with that number they are taxing you on your home? Most states figure this number out by using what is called a millage tax, or levy or rate. Basing the tax on a dollar, and a mill being 1/1000th of a dollar. An easy example is that if your home were valued by the assessor at $100,000 and the millage rate is 1 mil per 1,000 in value, your tax would be $100 for that year. But there is one more step to the process.
As the value of your home goes up or down, the tax rate goes with it. This is where the assessor comes in. Normally an assessor will research your area and find what homes like yours are on the market for and place a like value on your home. Generally the taxing agency, say your county, will set a tax assessment rate, let's say 10% of actual value. So (in the tax case above) the home was assessed at $100,000 and the county's rate is 10% of value assessed, so you pay ($100,000 x 10% = $10,000 x 1/1,000th or a tax of $10.00). That is it in a nutshell.
It is very advisable to do a trial assessment on your home in comparison with properties in the area. It is a good practice to keep the government agencies on their toes. They do make mistakes.
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Property Taxes Explained
A property tax is as well related as a real property tax as it's most oftentimes levied against real property. There are as well several types of these sort of taxes, suchlike individual property tax and commonly evaluated and billed differently from real tax which includes individual ownerships such like vehicles, bikes, boats and motor home.
Local governments suchlike counties and metropolises gain revenue from taxes of properties.it's commonly utilized for government governance and disbursements for initial respondents suchlike law enforcement officeholders, paramedicals and firemen. Moreover, it's as well utilized to fund localized homages and aids pay up for services suchlike parks, community schemes, libraries, community centers and schools. School zones oftentimes get big share of real taxes.
The benefits of this sort of tax includes the following:
1. It's administratively and technically conceivable to bring in and sustain in about every conditions.
2. More affordable to dispense and it's conceivable to aspire for a price output ration of 2%or yet lower.
3. It's difficult to avert or elude and the collecting success values of 95% is simply attained.
4. Real taxes are obvious.
5. The public realize the concept of the market price and therefore value the appraisal basis.
6. There is fine understanding between the appraised rate and the capability to pay up.
7. The tax could be marginally increasing if properly organized.
8. Incomes are buoyant and sure.
9. It's well appropriate as a generator of locally returned revenue for the local authorities.
The problems of taxes on properties include:
1. It's not faultless and oftentimes not well-known. Nevertheless, one ought to bear in mind that there's no such thing as a flawless tax and tax revenue is never well-known.
2. The foil of the taxation displays irregularities, which can be exaggerated in world perception.
3. The confidentiality of property taxations conceals the real outcomes of the evaluated rate.
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