After another brutal Maine winter, summer is finally here. Even though many small business owners may try to take some time off to enjoy the sun, it’s still important to remain diligent about business and personal tax planning. Here are some summer tax-planning tips to help out.
Summer Tax Tip #1: Entertain Business Clients
Small business owners may be eligible to write off 50% of the cost of business meals and entertainment if they are having a substantial business discussion with a client, either before or after. For instance, a business owner might treat a client to dinner after finishing up a new contract. The 50% limit applies to all the qualified expenses, including the amounts paid for the client, the business owner, and their significant others.
Summer Tax Tip #2: Throw a Company Picnic
Generally, the cost of a picnic or barbeque can be deducted. These types of events provide workers with a nice break, and the 50% limit on meals and entertainment expense deductions also doesn’t apply. It’s important to remember that to qualify for the 100% deduction, the entire staff must be invited to the event.
Summer Tax Tip #3: Harvest Investment Gains or Losses
Summer is also a convenient time to survey investment portfolios. If capital losses from securities transactions have already been incurred this year, any gains realized between now and the end of the year may be absorbed by those losses. Conversely, if there were capital gains from securities transaction earlier this year, the losses harvested in the second half of the year can offset those gains plus up to $3,000 of ordinary income in 2015.
Summer Tax Tip #4: Take Advantage of Business Travel
As long as a business trip’s primary purpose is business-related, travel expenses can be written off. This is true even if a business owner does some vacationing at the same time. For instance, spending the business week in meetings and the weekend sightseeing still enables the business owner to deduct the entire cost of airfare plus business-related meals and lodging.
Summer Tax Tip #5: “Go Fishing” for Deductions
The IRS won’t allow deductions for an “entertainment facility,” such as a boat or hunting lodge. But qualified out-of-pocket entertainment expenses can still be deducted, subject to the 50% limit. For example, no depreciation deduction is allowed when taking client out on the boat, but it may be possible to write off the costs of boat fuel, food and drinks, and even the fish bait, if qualified under the usual business entertainment rules.
More Tips Available
These are just a few possibilities to consider. Meet with Filler & Associates to discuss them, as well some other tax-saving ideas.