Need Another Personal Toy?

The same rules apply for a motor homes, trailers, lawn mowers, etc that you use 100% for business use in the year of purchase even though you may not use that asset again for business after the year of purchase.

Need a New Personal SUV

If you buy a new or used truck or SUV at the end of the year and claim 100% business-use (by, for example, purchasing it on December 31st and driving it from the dealership to Office Depot to purchase paper for your business and then leaving it in the Office Depot parking lot until January 1st), then you can write off 100% of the cost of the vehicle in the year that you buy it even though you are likely never going to use that vehicle very often for business again. If you buy the same vehicle mid-year and use it 5% for your business, then your deduction would be 5% of the cost of the vehicle. This strategy works best if the vehicle is titled in the name of the business, but that isn’t absolutely necessary.

Changes to the Meals Deduction

In general, you can deduct 50% of meals and 0% of entertainment. There are various exceptions to this, such as:
a. You can deduct 100% of the office holiday party or picnic
b. You can deduct 100% of the transportation to the entertainment event or meal
c. You can deduct 100% of the food offered to the public for free (e.g. seminar, open house)

Business Gifts

You can deduct up to $25 in gifts paid to an individual per year.  Thus, if you give a client a $50 Starbucks gift card, you can deduct $25 of that gift.  How to get around this?  Give a gift of $25 to the client and a gift of $25 to that client’s spouse and deduct $50 in total instead of just $25. 

Hire your Children

Assume that you are in the 24% Federal tax bracket (you would be if you had taxable income above $165K if married-filing-jointly). If your small-business employs your child and pays that child $10K, then you get to deduct $10K at 24% and the child pays tax on that $10K at a 0% Federal tax rate. Your only cost is the 14% FICA tax paid on that wage if you are an S Corp. If you are a partnership or sole-proprietor, then you don’t have to pay FICA tax when you employ your children. Takeaway: Hire your child and save 10% if you are an S Corp and 24% (plus maybe another 14% SE tax) if you are a partnership or sole-proprietor on whatever you pay that child. In addition, the wage that you pay the child gives the child earned income which allows him or her to make a Roth IRA contribution. This strategy would also work if your children help in your rental business (i.e., mow the lawn).

Rent Your Home to your Business

Your business can rent your home (or a room in your home) from you for up to 2 weeks in a tax-advantaged manner. Your business pays you and deducts the payment and you don’t have to include the rental income on your personal tax return. Example: Your business invites your employees to your home for a Christmas Party. Your business rents your home from you and pays you a fair-rental-rate of $2,000. Your business can deduct the $2,000 payment. You, the individual, don’t have to treat that $2,000 as income. Thus, you enjoy a $2,000 deduction for transferring money from one of your pockets to the other.

Donation vs. Advertising

If you get business-recognition for your donation, then you can deduct it as advertising instead of as a donation. Advertising is an above-the-line deduction that always saves tax. Donations are an itemized deduction that sometimes save tax (and never as much as an above-the-line deduction).