Top Three Tax Planning Strategies for Your Organization

Tax planning for your organization is essential if you want to benefit from the available credits and deductions your business is eligible for. Furthermore, it can help you understand and manage the numerous federal and state tax burdens businesses must comply with. So it’s no surprise that business owners are considering¬†tax planning strategies to help them wade through these neverending processes. And if you’re good at planning your taxes for the whole year, you can undoubtedly plan your business strategies as well. And with the ever-changing and ever-evolving tax legislation brought on by the government, it’s necessary to take a stance. Let’s get to know the top three here.

Take Advantage of Depreciation

Depreciation may be good or bad, depending on where you are. For brand new cars, it’s not a good thing since you won’t be able to buy them at a value. But when it comes to taxes, depreciation can be a great thing for business owners. In fact, you can utilize it since it allows businesses to recover capital expenditures as an expense. As a result, it reduces taxable income and the overall tax burden. One such legislation, which is the Tax Cuts and Jobs Act allows businesses to depreciate 100% of certain property the year it was acquired.

Timing the Considerations

Another tax planning strategy you need to consider is to time your considerations. Timing the recognition of income and expenses may help businesses manage their tax liabilities. For some companies, it may mean accelerating income and deferring some costs. In the meantime, for some, it may also mean deferring income and accelerating expenses. Overall, it will depend on deciding on the optimum strategy for your business. Sometimes, it requires multi-year projections using varying alternatives. However, it will depend on your business or organization and what you plan to do to time your recognitions, such as your income and expenses.

Turn to Account Method Planning

The tax accounting method is focused on generating tax benefits by accelerating tax deductions and deferring taxable income. Afterwards, it will reduce the amount of tax owed in the current year. Taxpayers often overlook the benefits of accounting method planning in places where statutory tax remains constant. That’s because moving income or expense items into different periods generally don’t result in permanent tax savings. Instead, it merely generates a benefit that will reverse in future years. But in an environment with possible rate changes, you can still obtain permanent tax savings.