Sullivan & Company - Certified Public Accountants 4709 Montgomery Lane #201 - Bethesda, MD, 20814 Phone: 301-657-8080




Paul Sullivan, CPA

Sullivan & Company


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Feature Articles

- Year End Tax Saving Ideas For Individuals
- Year-End Tax Planning for Businesses
- Retirement Contributions Limits and Other Tax Benefits for 2012
- Three Most Common Budgeting Errors

Tax Tips

- Income from Foreign Sources
- Check Your Withholdings
- Expanded Adoption Credit

Financial Planning Tips

- Make Gifts to Minimize Estate Taxes
- Year-End Tax Review Meeting
- Review October's Budget vs. Actuals



Year-End Tax Planning for Businesses


There are a number of end of year tax strategies businesses can use to reduce their tax burden for 2011. Here's the lowdown on some of the best options.


Purchase New Business Equipment


Section 179 Expensing: Business should take advantage of Section 179 expensing this year for a couple of reasons. First, is that starting in tax year 2010 and continuing into tax year 2011, the maximum Section 179 expense deduction for equipment purchases increased to $500,000 ($535,000 for qualified enterprise zone property) and the bonus depreciation increased to 100% for qualified property. Beginning in tax year 2012 however, the Section 179 deduction is scheduled to drop to $125,000 and the bonus depreciation to be reduced to 50 percent and then be phased out completely.


In other words, in 2011 businesses can elect to expense (deduct immediately) the entire cost of most new equipment up to $500,000 (subject to a dollar-for-dollar reduction in that $500,000 for property placed in service that exceeds the maximum amount of $2,000,000).


Qualified property is defined as property that you placed in service during the tax year and used predominantly (more than 50 percent) in your trade or business.


Property that is placed in service and then disposed of in that same tax year does not qualify, nor does property converted to personal use in the same tax year it is acquired.


Note: Many states have not matched these amounts and, therefore, state tax may not allow for the maximum federal deduction. In this case, two sets of depreciation records will be needed to track the federal and state tax impact.  Please contact our office if you have any questions regarding qualified property and bonus depreciation.


Timing: If you plan to purchase business equipment this year, consider the timing. You might be able to increase your tax benefit if you buy equipment at the right time. Here's a simplified explanation:




Conventions. The tax rules for depreciation include "conventions" or rules for figuring out how many months of depreciation you can claim. There are three types of conventions. To select the correct convention, you must know the type of property and when you placed the property in service.


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These (Purchasing New Business Equipment, Section 179 Expensing, Partnership or S Corporation Basis, Retirement Plans, Dividend Planning or Budgets) are just a few of the year-end planning tax moves that could make a substantial difference in your tax bill for 2011. But the best advice we can give you is to give us a call at 301-657-8080. We'll sit down with you, discuss your specific tax and financial needs, and develop a plan that works for your business.



As always you can call our offices if you have any questions about these or any other accounting, tax, financial planning or insurance related issues, at 301-657-8080. 


Regards, Paul Sullivan, CPA

President, Sullivan & Company





Sullivan & Company, CPAs | 4709 Montgomery Lane | Bethesda, Md. 20814 | email: | Like Us on Facebook

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