How To Reduce Your Business Taxes
Reducing business taxes is priority for many small & mid size businesses. Cadence Bank highlights how businesses can take advantage of tax-saving opportunities.
“By implementing year-end tax strategies, businesses can help ensure they pay the minimum amount of tax when they file their 2016 returns next year,” says Cadence Bank Treasury Management Senior Vice President Kacy Owsley. “Without proper planning before December 31, companies might neglect to implement strategies that could result in significant tax savings.”
Permanent vs. Temporary Tax Reduction
Amy Roberts, National Managing Partner, Corporate Tax Services for Grant Thornton LLP, divides corporate tax strategies into two broad categories: those that result in permanent tax reduction and those that result in temporary tax reduction. “Two good examples of permanent tax reduction strategies are the Section 199 domestic production deduction and the research and development (or R&D) tax credit,” she says.
The Section 199 deduction is available to manufacturers that perform domestic manufacturing and certain other production activities. These typically include the manufacture, production, growth or extraction (MPGE) of tangible personal property that’s done in whole or in significant part in the U.S.; construction of real property in the U.S.; and engineering or architectural services in connection with real property construction projects in the U.S.
The R&D tax credit is a dollar-for-dollar credit against taxes owed or paid. Companies can take the credit for all open tax years as well as the current year, and tax credits may be carried forward 20 years. R&D expenditures generally include all expenses related to the development or improvement of a product. Roberts says a wide range of different research and development activities qualify for the deduction, so you should talk to your tax advisor to determine if your company could benefit from the R&D tax credit.
Year-end Tax Strategies
Most year-end tax strategies fall under the category of resulting in temporary corporate tax reductions, says Roberts. “These strategies generally revolve around the idea of accelerating deductions for capital expenditures and fixed assets into the current year while deferring taxable income into the following year,” she explains. “Doing so will effectively shift some of your 2016 income into 2017, thus reducing this year’s tax bill.”
Don’t Forget Retirement Plan Contributions
This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.