2020 Tax Planning Opportunities For Small Businesses

by Karen Stern

The start of a new year means tax planning. And careful tax planning remains critical as the second tax-filing season after tax reform approaches. Working closely with your tax advisor to identify the best strategies for your situation is imperative post-TCJA (Tax Cuts and Jobs Act). While rates were reduced for both individuals and corporations, many tax breaks were eliminated and several of the provisions are only temporary, unless Congress makes them permanent.

Below are a few tax strategies that could still impact your business this year. Consider talking with your advisor about how these provisions could impact you.

- Business structure. Many business owners choose entity structures that combine pass-through taxation with limited liability, but TCJA changes warrant reevaluating the tax consequences of business structure. Consult your advisor if you’re considering what structure is right for your business.

- Bonus depreciation. Bonus depreciation was expanded, and Section 179 limits were raised. The maximum allowable expense increased to $1,000,000 but starts being phased out when asset purchases exceed $2,500,000. There is a 100 percent bonus depreciation on qualifying property until December 31, 2022.

- Sale or acquisition. Whether you’re selling your business or acquiring another company, the tax consequences can have a major impact on the transaction’s success or failure. Exit strategies require planning well in advance of any transition, whether you are drafting a buy-sell agreement or considering selling interest in the business to family members.

- Charitable donations. Giving to charity can be a flexible tax planning tool because you can control the timing to best meet your needs. Depending upon your circumstances, cash donations, stock donations, or direct IRA contributions may be a best fit for your charitable giving strategy.

Learn more about how tax reform could impact your tax planning. Contact your advisor or Karen Stern, Partner in Charge of the Brown Smith Wallace Entrepreneurial Services Group, at kstern@bswllc.com.

Karen Stern, CPA, (kstern@bswllc.com), partner in charge, Brown Smith Wallace Entrepreneurial Services Group, provides tax and accounting services for companies ranging from start-ups to $20 million in revenue.