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Financial
Review Its
Not Too Late To Plan For Your 2004 Tax Filing
The 2004 tax filing season is upon us, but
it’s still not too late to do some tax planning to lower
that corporate tax bill. There were several changes to the tax code in
2004 that impact businesses; here are a few of the changes
that may affect your business:
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Business related mileage - standard
mileage rate for the cost of operating your car or truck
increases from 36 cents to 37.5 cents for all business
miles
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Depreciation and Section 179 expense – the
maximum section 179 deduction you can elect for property
you place in service in 2004 is increased from $100,000 to
$102,000
There are many things business owners can do
to lower their tax bill in 2004. Here are a few ideas you
may want to consider:
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Contribute to a Retirement Benefit Plan.
Your contributions as an owner or employee are tax
deductible from your current income, thus reducing your
present taxes. A contribution to a tax advantaged
retirement plan must come from earned income, meaning
compensation for active work. An investor in a business,
who isn’t active, cannot deduct contributions to the
retirement plan. Income generated by your investments
accumulates tax free until withdrawn. Types of plans
include: IRA, Simple IRA, SEP, 401(k), Simple 401(k),
Defined Benefit Plan, Profit Sharing Plan
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Contribute to a Health Plan.
Tax rules for health benefits vary, depending on whether
or not a business is incorporated. For C-Corporations
medical costs. Including insurance premiums paid for by
owners and employees is entirely tax deductible to the
corporation and tax free to the recipients.
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Purchase in 2004, those items needed for
the new year.
This will allow you to realize the tax savings from the
purchase in 2004 versus 12 months from now. These
deductions can really add up, especially if you take
advantage of the IRS Section 179 that allows a small
business owner or c-corporation to deduct up to $102,000
of asset purchases each year as a current operating
expense. Provided the listed property is used 50% or more
of the time for business. This produces an immediate
write-off of capital assets. Some typical assets that
qualify for Section 179 include: vehicles, cell phones,
and computers.
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For example, if you buy a $1,000 computer
and use it for your business, you could deduct the full
cost from your taxes. If you were in the 28% federal
income tax bracket, this would save you $280 in income
tax. In effect, you’d be getting a 28% discount on the
computer.
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The most popular tax deduction for a
small business is for automobile expenses. This year,
business owners can deduct extra depreciation on
vehicles: an extra $7,650 of the cost of a new car or
the full cost of a heavy SUV (over 6,000 pounds) - this
could mean a deduction of up to $60,000 or $70,000 in
one year!
Many business owners fail to take advantage
of all the tax deductions available to their business. Here
are a few of the more commonly overlooked tax deductions you
should be aware of:
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Accounting fees for tax preparation
services
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Bank service charges
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Business related books, magazines,
seminars, association dues
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50% of self employment tax
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Appreciation on property donated to charity
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Trade or business tools with life of one
year or less
As a business owner, it’s in your best
interest to plan for your 2004 tax filing. There are
some changes in the tax law that could impact your business.
Taking the time now to understand these tax law changes,
taking advantage of some of the tax saving ideas above and
ensuring that you or your tax advisor do not overlook any
tax deductions for your business can have a positive impact
on your bottom line!
Note: The
information above is provided to give you some general
direction regarding your 2004 taxes. However, before you
complete any significant tax transactions based on the
information presented above, please contact us for advice on
how this information applies to your specific situation.
Thank you for your continued interest in Pinnacle
Consultants. If you would rather not receive e:mails
with news, updates and tips from the financial world, please
click the following link
paul@pinnacleconsultants.org
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Special Points of Interest
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The standard mileage rate for the cost of
operating your auto increases from 36 cents to 37.5 cents for all business
miles
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Contribute to
a retirement plan, a health plan and/or make those purchases in 2004 to
lower your 2004 tax bill
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Pinnacle Consultants
L.L.P.
20704 N. 90th Place
Unit 1049
Scottsdale, AZ 85255
P: 480 980-3977
F: 480 585-1920
Website:
www.pinnacleconsultants.org
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Contact Us:
paul@pinnacleconsultants.org |