2020 Year End Income Tax Planning for Your Business

Published by Heather on

2020 Year-End Tax Planning for Your Business

As we approach the end of an eventful year, it is important to take some time to think of planning moves that may help lower your business’s 2020 income tax bill.

Below we have compiled a list of items that may help save or defer tax if taken into account before the end of 2020.

  • Pass-through entities (S corporation or partnership), sole proprietors, and some rental properties: you may qualify for a 20% deduction of your business income. Many limits and exclusions may apply.
  • Consider acquisition of capital equipment that may qualify for 100% first year bonus depreciation and/or Section 179 first year expensing elections.
  • Maximize your contributions to retirement plans and consider year-end accruals for any contributions deductible in 2020 but payable in 2021. Qualified retirement plans may now be established through the extended due date of the tax returns.
  • If you anticipate a tax loss for 2020, consider your ability to carryback your losses into prior years to request refunds of overpaid income tax or how best to use those losses in subsequent years.
  • Review your basis in pass-through entity businesses to assess your ability to deduct any current year losses.
  • Determine if there is any opportunity to accelerate or defer income and/or deductions between 2020 and 2021.
  • Consider eligibility for employment and/or income tax credits resulting from paid family or medical leave, hiring of disadvantaged workers, or other employee retention programs.

Lastly, do remember that expenses used to request forgiveness of a PPP (Payroll Protection Program) loan are currently not considered deductible and therefore may increase your 2020 taxable income.

Please visit our website for additional details of the above noted items in addition to other potential year-end planning opportunities. You should examine any tax planning options thoroughly before initiating action. We are happy to discuss these with you and to tailor a tax plan that will work best for you.