You can’t avoid paying taxes altogether (unless you’d like a visit from an IRS agent), but there are a few year-end tax moves you can make your tax bill could be a lot smaller next year.
- Start a new business
Did you open your first yoga studio this year? As long as your start-up expenses don’t exceed $50,000, you can generally deduct $5,000 in business start-up costs during your first year.
If you incurred over $50,000 in start-up costs, your available first-year deductions will be lowered by the amount that you exceed $50,000. For example, if you spent $52,500, you’d only be able to deduct $2,500.
If you haven’t committed to your next venture yet, you can save on your taxes by getting the wheels in motion and spending your first $50,000 before December 31.
- Buy new business equipment
If you buy new equipment, like weights for your gym or fresh towels for your day spa, that you put into service before the end of the year, you can deduct the cost on your next tax return (up to $510,000). The only qualifier is the equipment has to be for the exclusive use of your clients.
- Pre-pay for streaming music
If you play music for your clients, you can pre-pay for a year of streaming and deduct the cost now.
- Repair old equipment
Sometimes it’s better to repair that old treadmill, rather than buy a new one. You can fully deduct the cost of routine maintenance for business equipment that’s suffering from wear and tear.
- Invest in education
You can deduct the cost of education related to your current business. Whether it’s paying now for a Group Fitness Instructors Certification, or taking an online class to learn how to better manage your studio, investing in yourself now means a bigger deduction come tax time.
- Donate to a cause you care about
- Buy bookkeeping in bulk
If you plan to use an online bookkeeping service next year (like Bench), you can pre-pay for the next year of bookkeeping and write it off as a deduction. The same applies if you’re behind on this year’s books and pay for catch-up bookkeeping.
The way you deduct charitable donations is depends on your business structure. This guide can help you sort out the difference.
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