With cold weather settling in, colorful lights shining bright and the crisp fresh smell of burning wood coming from the chimneys, it is safe to say the holiday season is upon us! With all the excitement in the air, it’s hard to believe anyone in their right mind would even think about taxes. Of course as CPAs, we are always looking for ways to save taxes no matter what time of year it is. Here are a few tax savvy holiday gifting ideas that can help you to give and save taxes at the same time.
Buying Gifts = Saving Money
This year be strategic in the way you shop. Use tax deductions to your advantage by considering a holiday gift idea that may also be tax deductible. For example, instead of buying a nice pair of slacks think about what your business needs are. For real estate investors, you might need an iPad because you are always on the go and need an organizational tool with internet capabilities. Think outside the box and you will be surprised with what you and your tax advisor can come up with!
If you are thinking about purchasing some bigger items for your business this year, consider using the 50% bonus depreciation. Using this savvy loophole could allow you the benefit of taking a 50% immediate tax write-off on items that would otherwise need to be written off over several years. Not bad for some new assets! Instead of having to depreciate the cost of the item over many years, you can take a 50% write-off immediately this year. The key is that this applies to brand new assets only.
For example, if you are thinking of buying a new car or truck for your business or investing, this may be the year to do it.
For those in the real estate business, the bonus depreciation benefit could also apply to new furniture, equipment or appliances.
Investing = Saving Money
Don’t forget that you may be able to combine the various tax loopholes. Proactively planning with your tax advisor, you may combine the power of component depreciation and bonus depreciation to get the most tax write offs on your investment properties for this year. Please note that the bonus depreciation is set to expire as of December 31st, 2013. so make sure you don’t miss out on this great tax advantage!
Helping Your Business = Saving Money
During the holiday season money can be tight for some people. Holiday bonuses are on the minds of most employers this time of year, but you may find it hard to gather the available cash to give bonuses this year. Considering tax savvy ways to reward your employees can be rewarding for both you and them. Paid time off during the holidays is one good way to reward your team instead of a bonus payout. This is a great gift that doesn’t eat away at your cash flow.
It may also be time to consider purchasing a new double monitor, computer, or a work iPad for your employees. Not only could these items be tax deductible but you may be able to combine these expenses with the bonus depreciation strategy above to maximize and accelerate your tax write-offs for 2013.
During this time of the year it is also the peak time for office parties. Generally meals and entertainment are deductible but only up to 50%. However, there is an exception to this rule and holiday parties may be 100% tax deductible. What a great excuse to throw a great holiday party this season!
Investing in Your Family’s Future = Saving Money
Last but not least…don’t forget the little ones! A tax savvy gift idea for kids or grandkids could be to contribute money to their ESA or Roth IRA for their future. This potentially gives them the power to grow tax-free money and even invest in a business or real estate themselves. What a great gift!
Get creative this holiday season and reward your family, friends and employees with these Tax Savvy Holiday Ideas. Have a safe and happy holiday!
Photo: Steve Rhodes