The qualified business income (QBI) deduction is available to eligible businesses through 2025. After that, it’s scheduled to disappear. So if you’re eligible, you want to make the most of the deduction while it’s still on the books because it can potentially be a big tax saver. Deduction Basics The QBI deduction is written off at the owner level. It can be up to 20% off: QBI earned from a sole proprietorship or single-member LLC that’s treated as a sole proprietorship for tax purposes, plus QBI is from a pass-through entity, meaning a partnership, LLC that’s treated as a partnership for tax ..read more

IRS guidance provides the 2024 depreciation limits for “luxury” business vehicles. For vehicles placed in service in 2024, depreciation limits (including first-year bonus depreciation) are $20,400 for year one, $19,800 for year two, $11,900 for year three, and $7,160 for each year after that. This includes passenger cars and SUVs, trucks, and vans if their gross vehicle weight (GVW) is 6,000 pounds or less. The IRS also announced lease inclusion amounts for lessees of passenger vehicles first leased in 2024. Read Rev. Proc. 2024-13 on irs.gov for more details (PDF). Purchasing a heavier v ..read more

Businesses shut down for many reasons. Examples include an owner’s retirement, a lease expiration, staffing shortages, partner conflicts, and increased supply costs. If you’ve decided to close your business, you might need assistance with some steps in the process, including handling various tax obligations. Tax Return and Forms A final income tax return and related forms must be filed for the year of closing. The correct return to file depends on the type of business. Here’s a rundown of the requirements. Sole proprietorships. You must file the usual Schedule C, “Profit or Loss from Busi ..read more

If you own a C corporation, you know there’s a tax advantage to taking money out as compensation rather than as dividends. The reason: A corporation can deduct the salaries and bonuses that it pays executives, but it can’t deduct dividend payments. Therefore, if funds are paid as dividends, they’re taxed twice, once to the corporation and once to the recipient. Money paid out as compensation is taxed only once to the recipient employee. However, the amount of money you can take out of the corporation this way is limited. Under tax law, only compensation deemed to be reasonable can be dedu ..read more

Payable-on-death (POD) accounts can be a quick, simple, and inexpensive way to transfer assets outside of probate. They can be used for bank or credit union accounts, certificates of deposit, and even brokerage accounts. Setting up such an account is as easy as providing the financial institution with a signed POD beneficiary designation form. Upon your death, your beneficiaries need to present identification to the bank, with a certified copy of a death certificate, and the money or securities will be theirs. Be aware that POD accounts can backfire unless they’ve been coordinated carefully wi ..read more

If your small business is strapped for cash (or likes to save money), you may find it beneficial to barter or trade for goods and services. Bartering isn’t new — it’s the oldest form of trade — but the internet has made it easier to engage with other businesses. However, if your business begins bartering, be aware that the fair market value of goods that you receive in these types of transactions is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties. Fair Market Value Here are some examples of an exchange of services ..read more

Consider some options if you’re looking for a retirement plan for yourself and your employees but are worried about the financial commitment and administrative burdens involved. One possibility is a Simplified Employee Pension (SEP). This plan, which comes with relative ease of administration and the discretion to make or not make annual contributions, is especially attractive for small businesses. There’s still time to see tax savings on your 2023 tax return by establishing and contributing to a 2023 SEP right up to the extended due date of the return. For example, if you’re a sole proprietor ..read more

With a bit of planning, you may be able to boost your itemized medical expense deduction when you file your 2024 tax return next year. Only eligible expenses exceeding 7.5% of your adjusted gross income are deductible. It’s not an easy hurdle to clear short of a major medical disaster, which, of course, you want to avoid. But you can use a strategy called “bunching” medical expenses to exceed the 7.5% threshold. Say, for example, that you’ve already scheduled surgery involving out-of-pocket expenses, but you still fall short of the deductible threshold. Consider scheduling elective procedures ..read more

At one time, life insurance played a much more significant part in an estate plan than it does now. Why? Families would often use life insurance payouts to pay estate taxes. But with the federal gift and estate tax exemption at $13.61 million for 2024, far fewer families currently are affected by the estate tax. However, life insurance remains a powerful tool to help provide for your loved ones in the event of your death. The amount of life insurance that’s right for you depends on your personal circumstances. It’s critical to review your life insurance needs regularly in light of changin ..read more

Mistakes happen. What if you receive a refund from the IRS that you’re not entitled to? Or what if you receive one that’s more than you’re entitled to? How Do You Go About Returning an Erroneous Refund? How you must handle it depends on the details. A paper check refund should be voided and returned within 21 days of receipt to the address in the link below. But suppose you cashed the check. In that case, submit a personal check to that address within 21 days. If the refund was by direct deposit, contact your bank to have them return the deposit. Also, contact the IRS at the phone number ..read more