2020 Small Business Tax Tips

Posted by Karen Erdelac on Feb 12, 2020

2020 Small Business Tax TipsTax season is here again and small business owners and accountants will be looking for every possible deduction. Here we’ve highlighted several different ways for your small business to win tax season 2020.

Salt Cap

“As of 2019, filers can only deduct up to $10,000 in state and local property and income taxes. Many business owners operating a pass-through entity in a high-tax state can take advantage of SALT deductions. Winegarden said all business owners should be aware of this cap. "I really think in the high-tax states, the SALT cap is going to be meaningful, more for small businesses just because they're going to be filing through their personal taxes," he said.”

Take Advantage Of Retirement Plan Deductibles

“The TCJA offers new deductibles for self-employed individuals on retirement plans. With all retirement plans, each choice comes with different deadlines to manage and contribution limits. Self-employed individuals with an SEP-IRA, for example, could contribute up to 20% of their earnings, or a maximum of $56,000, in 2019. Those employed by their own corporation can contribute up to 25% with the same monetary cap.”

Each Of These Expenses Are 100 Percent Tax Deductible

  • Advertising and promotion
  • Business meals
  • Business insurance
  • Business interest and bank fees
  • Business use of your car
  • Depreciation
  • Education
  • Home office
  • Interest
  • Legal and professional fees
  • Moving expenses
  • Rent expense
  • Salaries and benefits
  • Telephone and internet expenses
  • Travel expenses
  • Bonus: Personal expenses

Consider Restructuring

“Tax reform created a new 20 percent tax deduction for owners of certain pass-through businesses. A pass-through business is one in which profits from the business flow to their owners to be taxed under the individual income tax. Sole proprietors, partners in a partnership, members in an LLC or LLP, or owners of S corporations may qualify for this valuable tax break. However, to maximize the deduction, the new law may require the owner to change the tax structure of their business. For example, some sole proprietors may need to become an S corporation to maximize their tax savings under the new law.”

Qualified Research Expenses Credit

These small business tax credits are designed to encourage domestic research and development. The calculation of the credit can be very complex, but it can also provide substantial tax savings.

This definition is relatively broad but encompasses activities such as:

  • Developing new or improved products, processes or formulas
  • Prototype or model development
  • Developing or applying for patents
  • Certification testing
  • Developing new technology
  • Environmental testing
  • Developing or improving software technologies
  • Building or improving manufacturing facilities
  • Streamlining internal processes

Keeping your finances in order is essential to the success of your small business and can make tax season far less stressful. Click below to download our Free eBook: Small Business Financial Fundamentals.

Small Business Financial Fundamentals

Topics: small business owner