Tax 
Day is the day no one looks forward to. As you collect your receipts, statements, and forms, you may also want to put together a list of questions for your tax preparer about deduction items.
As Hortica Retail Sales Specialist Maria Shepherd explains, taking tax advantage of certain building improvements, self-rents, S corporation advantages, and showing a reduction in profits can all make a difference on what you pay Uncle Sam—and affect your insurance coverage.
In the article “Year-End Tax Tips for Florists” published October 16, 2018, in the Society of American Florists newsletter, author Derrick P. Meyers explains some considerations that could help make this year’s tax bill a little lower.
With any business that shows a profit, the goal is to to reduce that profit as much as possible to keep the tax bill low. Even if you’re not showing a profit, you’ll still want to make adjustments that’ll reduce your profit in future years. Meyers takes a look at a couple of the most common ways.
Depreciation
Depreciation can be one of the biggest tax advantages available. Several changes have been made to the depreciation rules.
The federal 179 expensing election has been increased to $1 million. That allows you to accelerate depreciation on assets up to that amount. You can take $1 or $1 million, or any number you choose between, to dial in your tax liability exactly where you want it.
The 179 depreciation rules also apply to certain building improvements. This bonus depreciation is now 100 percent of assets purchased with no limit. Bonus depreciation automatically applies to all purchases unless you elect out of bonus depreciation. This means that all assets you buy that have a class life of 3, 5, 7, or 10 years are automatically depreciated 100 percent in the year of purchase. You can opt out of bonus depreciation totally for the year, or by each life class.
Pass-through tax deduction
Another new deduction this year applies to all business forms—except regular (or C) corporations. The 20 Percent Pass-Through Business Deduction reduces all profit by 20 percent before taxes are calculated. There are limitations, which your accountant can outline. The deduction also applies to rental income and publicly traded partnerships, but not other passive income such as interest, dividends, or capital gains.
If you own the building that your C corporation occupies, you can increase rental income and take advantage of the 20 percent deduction that’s not applicable to the C corporation’s profits.
You can also reduce salaries of S corporation shareholders, which will increase the profit of the S corporation. Since the S corporation gets the 20 percent deduction, this saves you income taxes as well as payroll taxes. However, you need to make sure the shareholders continue to earn a reasonable salary for their time worked.
When getting ready for Uncle Sam, don’t forget to also keep your agent in the loop as to any changes in these items that can also impact your insurance policies—specifically building improvements, rents, and revenues. If you have questions on this or other aspects of your business insurance coverage, we’re here to help.
For more information:
Hortica
www.hortica.com