It’s time to do a midyear review of your business tax planning. Here are five ideas to consider.
Hire your kids. If your child is under age 18 and works for your unincorporated business, there are no social security or Medicare taxes on the child’s pay. Wages paid to the child are also deductible. Just make sure the compensation is reasonable for the work actually performed.
Track your business driving. For 2010, the rate for business-related mileage is 50 cents per mile, and you can deduct actual costs for parking fees and tolls in addition to mileage. Keep detailed records to substantiate your deduction.
Deduct equipment purchases. You can expense up to $250,000 of business equipment purchased this year.
Check your benefits. If you offer health benefits to your employees, look into tax-advantaged plans such as health savings accounts, flexible spending accounts, or health reimbursement arrangements. These plans can reduce your taxes and help control your benefit costs. Also, check the new tax credit for health insurance you provide to employees. You must meet certain requirements to qualify.
Establish a retirement plan if you don’t already have one. Examining the choices now gives you time to select the best plan for your business and to get the paperwork completed. Then you’ll be set to make contributions as your cash flow allows — and to take the deduction on your 2010 tax return. Another plus: You may be able to claim a credit on this year’s tax return for the costs of establishing the plan.
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