Save on Your 2012 Tax Return: What You Can Do Today

It’s not too late to save on your 2012 tax return. Here are some tax tips of particular interest to small business owners:


A new car. 

If you purchase a new car and drive it for business by midnight, December 31, 2012, you or your corporation can claim up to $8,000 dollars in bonus depreciation.
This is added to the $3,160 luxury limit, so you could be looking at a deduction up to $11,160, depending on your actual business use of the car.

A new or used pickup truck.

A new or used pickup truck.

If you purchase a pickup truck and drive it for business by midnight, December 31, you may expense up to $125,000 of its cost. The pickup truck must have a Gross Vehicle Weight Rating (GVWR) of more than 6,000 pounds, a cargo area (a bed) at least 6 feet in interior length, which is not easily accessible from the passenger compartment. Even if the truck fails the other truck test, but passes the weight test, you may expense up to $25,000 of the truck, as it counts as an SUV.

A new SUV.

If you purchase a new SUV or crossover with a GVWR of more than 6,000 pounds, it is eligible for expensing up to $25,000, 50% bonus depreciation on amounts not expensed, and MACRS depreciation on the balance.

A used SUV.

A used SUV is eligible for the same expensing as a new SUV; however, it is not eligible for the bonus depreciation.

A new or used van.

A van may qualify for expensing up to $125,000. It must have a GVWR over 6,000 pounds, must fully enclose the driver compartment and load-carrying device. It must not have seating behind the drivers seat, and have no body section that protrudes more than 30 inches ahead of the leading edge of the windshield. If the van you purchase meets the GVWR requirement, even if it fails one of the other requirements, it still counts as an SUV and is eligible for expensing up to $25,000

Office equipment.

Office equipment is also eligible for expensing. However, if you spend over $500,000, you must reduce the $125,000 ceiling by a dollar for every dollar you spend over $500,000.

With a credit card.

The day you put a charge on your credit card as a sole proprietor or a corporation  is the day your expense is deductible. If you operate your business as a corporation but you’re the personal owner of the credit card, the deduction is realized when the corporation reimburses you. In this case, have the corporation reimburse you by midnight, December 31, to deduct the purchase on your 2012 tax return.


A business vehicle.

If you or your business own a vehicle and deduct it for business purposes, then it has taxable gains and deductible losses. The beginning basis is simply the original purchase price. Depreciation (from the tables or the IRS mileage rates) reduces the basis. When you sell the vehicle, compare the net business sales proceeds with net business basis to find the gain or loss. If you have traded in cars previously without taking advantage of this, you can calculate the loss based on all previously traded cars.
As Section 1031 exchanges, trades defer tax results to the next asset. For example, someone who has been in business for 10 years might have gone through three cars (converting a personal car to a business car, trading that car, and trading again). If that person were to sell their existing business car, the old basis of each previous vehicle would be included in the replacement vehicle’s basis. Based on the federal and state income tax bracket, the actual deduction could be significant.

Former business cars still in your household.

If there is a former business vehicle in your household, perhaps driven by a family member, then the driver is putting personal miles on a business vehicle. To claim an embedded loss in the vehicle, sell it to a third party.


Section 105 medical expenses.

Make them by midnight, December 31 to get the deduction this year.


A 401(k).

If you create a 401(k) by midnight, December 31, you can claim the deduction of any contributions made before the tax-filing deadline (including extensions).


Your children under 18.

If your kids help your business, what you pay them is deductible and exempt from payroll taxes. In addition, the standard 2012 deduction should allow up to $5,950 in tax-free wages for your child.


Appreciated stock.

Avoid the capital-gains tax by donating appreciated stock. You can also deduct the fair market value.

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