If you're a business owner, you may be able to deduct "ordinary and necessary" expenses related to keeping working animals. But the operative word here is "working," for example, dogs that guard against illegal entry or cats that protect inventory from rodents. In general, such expenses as food, veterinary bills, pet insurance premiums and related supplies are deductible. But if an animal is a part-time worker and part-time personal pet, you typically can deduct only the percentage of expenses that correspond to the animal's working time. Be sure to keep excellent records and talk to us about whether you're eligible to claim animal-related expenses as a business deduction.
Are you a small business owner looking to reduce your 2024 tax bill? Thanks to the Tax Cuts and Jobs Act, owners of pass-through entities may be able to claim tax deductions based on their qualified business income (QBI) and certain other income. This deduction can be up to 20% of your QBI, subject to limits that apply at higher income levels. Because of those limitations, be aware that some tax planning strategies can increase or decrease your allowable QBI deduction for 2024.
Contact us for help optimizing your overall tax results. Note: The QBI deduction is scheduled to expire at the end of 2025 unless Congress acts to extend it.
Will your company be affected by the business interest tax deduction limitation in 2024? Generally, interest paid or accrued by a business is deductible up to 30% of adjusted taxable income (ATI). Taxpayers with average annual gross receipts that don't exceed an applicable threshold for the three previous years are exempt from the interest deduction limitation. (For 2024, the applicable threshold is $30 million.) Note that business interest expense that isn't deductible generally may be carried forward indefinitely to succeeding tax years. Contact us to learn how the limitation on deductible business interest may affect your business.
Student loan assistance has been a hot topic of late. In response, the IRS is reminding employers that they can take advantage of educational assistance programs to help pay for their employees' student loan obligations through Dec. 31, 2025. Traditionally, these programs have been used to pay for books, supplies, fees, tuition and other education expenses for employees. Since March 27, 2020, they can be used to pay principal and interest on an employee's qualified education loans. Payments made directly to a lender, as well as those made to an employee, may qualify. For additional information click here.
Many small businesses use the cash basis of accounting, which means they record income when they receive it and generally deduct business expenses in the year they pay them. If your business follows this method, it might make sense to accelerate deductible expenses such as rent and insurance, paying them before year end. You might also be able to prepay certain expenses, though some must be prorated over time.
Note that if you expect your tax rate to increase next year, delaying expenses could be the better course of action. Contact us for more information about when these strategies are allowed and whether they'd benefit your business.
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