In
rush to get tax returns prepared and filed by April 15th, many overpay their taxes. Following are a few tax reduction tips that could help you save a bundle. Tax Credit For Starting A Small Business Pension Plan
Establishing a pension plan can help you retain important employees. What many business owners don’t realize is a tax credit can be claimed if business has 100 or fewer employees. Meet this requirement and you can take a tax credit of up to $500 in each of first three years of plan. Tax credits are extremely valuable because they are deducted directly from taxes you owe, not gross revenues.
The credit is 50% of certain start up costs you incur in each of first three years. The costs include expenses incurred in establishing and maintaining plan. They also include cost of any educational retirement planning programs you provide for employees.
For example, first assume that you spent $1,500 starting a pension plan for your employees in 2004. Next assume that you will spend $1,200 in both 2005 and 2006 for maintaining program and educating your employees. In this scenario, you would be eligible to claim a tax credit of $500 in 2004, 2005 and 2006.
Personal Loans To Business
Many business owners lose track of loans they make to their business. As a result, they incorrectly classify proceeds of loan as part of their gross revenues. This artificially raises gross revenues of business and adds to tax liability. Closely review your records for 2004 to make sure you are not making this mistake. Pay particular attention to charges on personal credit cards. You will be surprised how quickly numbers add up.
SUV Deduction Wounded, But Still Alive
Much has been made about “SUV Tax Deduction” that allowed purchasers of SUVs over 6,000 pounds to immediately deduct up to $100,000 of cost. Many mistakenly believe that American Jobs Creation Act of 2004 eliminated this deduction. It did not. Instead, it reduced deduction to $25,000 with remaining amount allocated to depreciation. This is still a significant immediate deduction. If you purchased a non-SUV truck that weighed over 6,000 pounds in 2004, you are not restricted to a “mere” $25,000 deduction.
