Apply a few smart tips and you can save big on your business taxes. Your accountant should walk you through all the options but here are just a few to start the all-important conversation on 2016 tax prep.

#1: You may still have time to take advantage of Section 179 deductions.   

Section 179 is a tax code that allows profitable businesses to deduct the entire price of a wide range of equipment and software purchased, financed or leased this year. The list of qualifying equipment and software is very inclusive and the ceiling has been raised from $250,000 to $500,000 this year. Your business can benefit greatly from this tax strategy whether you buy or lease (new or used) by December 31st.   Some eligible deductions include:

  • Any vehicle used for business purposes.
  • Property used in manufacturing, transportation and production.
  • The lease of any type of facility used for business or research.
  • Off-the-shelf computer software.

#2: Another write-off option is bonus depreciation.

With this option, while you can’t deduct more than the purchase price of a new (not used) item, it allows you to accelerate deductions up to 50% for 2015, 2016 and 2017, dropping to 40% in 2018.  New items include:

  • Computer systems and software
  • Machinery
  • Equipment
  • Office furniture

Using both options yields an even better tax advantage! You can claim a current-year write-off for a new or used heavy SUV which costs $25,000 maximum and put it to business use before the end of the tax year. After that, you can claim 50% first-year bonus depreciation for your new SUV.

#3: Defer taxable income

If you own a cash-based business, you can minimize 2016 taxes by deferring a portion of your taxable income into the upcoming year. Just ask your client/payer to hold off mailing in that check or paying online until January 1st. However, be careful not to put yourself into a higher income tax bracket.

 

#4: Prepay recurring expenses before Dec. 31.

An often overlooked tax-saving tip  is to pay as many future expenses as allowed by the end of the year. Examples of such expenses are insurance policies,  rent and office supplies—as long as you comply with the 12-month rule. This rule states that the economic benefit from the prepaid expense (insurance coverage or rent, for example)  cannot extend beyond the end of the next tax year or a year after your business realizes the benefit of the expenditure—whichever is earlier.

Tax laws are complex so make sure an expert is at your side.