Small Business Tax Breaks: Are You Leaving Money on the Table?

When running a small business, it’s easy to get caught up in the day-to-day demands of overseeing operations, managing cash flow, and ensuring customer satisfaction. With so many pressing priorities, exploring tax breaks and incentives often falls to the bottom of the to-do list. However, taking the time to learn more about available tax benefits can lead to significant savings and reinvestment opportunities for your business.

By working closely with your tax advisor, you can discover potential savings to improve your bottom line and free up resources to fuel growth.

How Small Businesses Can Benefit from Asking the Right Questions

While CPAs possess a deep understanding of the tax code and available benefits, the key to uncovering their full potential for your business lies in open communication. Being equipped with the right questions to start a conversation can be the catalyst to significant tax savings, resulting in the following:

  • increased profitability,
  • improved cash flow,
  • reduced tax burden, and
  • optimized budget allocation.

Strategic dialogue springboards proactive planning throughout the year to ensure that you’re not locked out of valuable tax savings at year-end.

In some situations, CPAs can also help growth-focused or cash-strapped businesses leverage tax breaks and incentives to overcome financial hurdles without resorting to a loan. This could free up a larger portion of cash flow for growth initiatives, equipment purchases, or simply to build a financial buffer while awaiting pending receivables.

Below highlights only some of the tax provisions that may offer tax savings:

  • qualified business income (QBI) deduction,
  • bonus depreciation and Section 179 expensing,
  • veteran-hiring credits,
  • green energy incentives,
  • home office and car expensing,
  • opportunity-zone credits

Exploring these tax benefits can be pivotal for your business. Here are a few questions that could help ensure that your CPA is aware of relevant details for effective tax planning.

Start the Conversation with These Key Questions

While the following questions provide a strong foundation, it's important to remember they might not all apply directly to your business. However, reflecting on them can spark a broader conversation with your CPA, uncovering opportunities you might not have considered.

  • What current or expiring tax credits might my business qualify for this year? This broad question opens the door for your CPA to explore options like the deduction for qualified business income of pass-through entities or investigate the applicability of opportunity zone credits if your business operates in a designated zone.
  • Are there any workforce-related tax breaks applicable to my business? There are a number of tax incentives available for employee training programs, employee health insurance costs, and veteran-hiring recruitment credits, among others.
  • How can I best utilize depreciation deductions for equipment and assets? Depending on your situation, your CPA can help determine the best depreciation method for your business, whether to expense the full purchase price of qualifying equipment or to strategically spread out the costs over the asset’s useful life.
  • What tax incentives may qualify for an office remodel or upgrades? There are several tax credits available for investments in green energy solutions and renovations that can create significant tax savings. In addition, upgrading your space to accommodate individuals with disabilities can potentially save you up to 50 percent of eligible renovation expenses.
  • Are there tax breaks available to incentivize investment in small businesses? If you’re looking to raise capital, the qualified small business stock (QSBS) incentivizes investors with the potential for tax breaks. Investors can potentially exclude a portion of the capital gains tax on the sale of qualified stock in a small business. The rules can be complex, so be sure to consult with an advisor for details.
  • Are there any disaster relief programs available to help my business recover
    from a natural disaster?
     Following a disaster, federal, state, and local disaster relief programs can offer valuable financial assistance to help your business get back on its feet. Your CPA can guide you through various programs that may include tax relief, grants, and low-interest loans.

Thinking Ahead

With expiring provisions from the Tax Cuts and Jobs Act on the horizon and a package of tax extensions stalled in the Senate, it’s important to keep tax strategies at the forefront of your business planning.

For guidance in navigating the specifics of small business tax credits and incentives, or if you have any questions, please contact your R&A advisor. They’re prepared to offer guidance to ensure your strategies are optimized and in compliance with ever-shifting regulations.

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About this Author

Adam specializes in international tax planning and analysis. Since 2012 he has coordinated offshore compliance submissions, international tax training relating to foreign pension plans, foreign investment in US property, and general foreign compliance. In addition, in conjunction with legal counsel, he assists international families regarding planning, entity structure, and transaction analysis.