2021 Year-End Tax Planning Tips

Year-end tax planning can be a challenge. With all of the new tax legislation enacted over the last year in response to various economic events, your business’s 2021 end-of-year tax planning will most likely be affected. 


There may be several opportunities and actions you can take before the end of the year to ensure that you are taking full advantage of every financial opportunity.  


  1. If you are a cash basis taxpayer, any expenses you already anticipate towards the beginning of 2022, try, and buy them now. This includes equipment as we can accelerate depreciation.


  1.  Donor-advised funds can be a good strategy for planned giving. For example, you can “donate” funds to the fund in 2021 and deduct it in 2021. And then the funds stay for future giving. 

https://www.ncfgiving.com/  here is an example of an option. You can also donate non-cash items like stock, land, etc. in the future.


  1. Retirement planning strategy – you will want to set up a 401K plan with a profit-sharing plan for next year to get ahead of the game.


  1. Donations of goods and items are also tax-deductible. So if you have old equipment or items at home you don’t need, you can donate them to the Salvation Army or Goodwill. There is also a nonprofit called Project Mend that collects used medical equipment and then gives it to families in need which is pretty cool.


  1. If you are paying year-end bonuses, make sure they clear before 12/31/21 so you can take them this year


  1. If you need a new vehicle for work, you can accelerate depreciation on SUVs or trucks over 6,000 lbs in weight. So we can deduct 100% of the vehicle in year one.


  1. Make sure you don’t have any business expenses on your credit cards so nothing is missed.


  1. Cost segregation is one of the fastest-growing areas in tax planning and has been used only by owners of large commercial projects. 

Essentially, cost segregation is the process of reclassifying the assets of a rental property into real and personal property, thus moving certain assets into an accelerated depreciation class. 


  1. For real estate investments – opportunity zones can be an excellent tax-free investment. Link here: https://gov.texas.gov/business/page/opportunity-zones


  1. A more aggressive tax strategy that might work for you is called a captive insurance company. It is a way to save quite a bit of taxes but only works in certain situations.


Each taxpayer’s situation is a bit different. If you would like to follow up and learn more about any of these opportunities, let the Badger CPA team know, and we would be happy to review for you. We can help evaluate your position and decide the best moves to take next. 


Contact us today to learn more.

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