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Fourth-quarter advice to minimize future tax bills

April 15 may be the day most associated with accountants, but good Certified Public Accountants know the fourth quarter is the most important time of the year.

April 15 may be the day most associated with accountants, but good Certified Public Accountants know the fourth quarter is the most important time of the year.

During the fourth quarter, companies can take action to minimize their tax impact come April 15 and evaluate budget and plans for the following year.

Here are five tax-planning tips that business owners and chief financial officers should consider in the fourth quarter.

Now may be a good time to buy equipment to take advantage of depreciation rules and reduce your company’s tax liability, or to plan purchasing and putting into service some equipment in 2016 and some in 2017. Your CPA can help develop a plan and projections on the optimal timing.

Late last year, Congress extended two major tax benefits for equipment purchases. The Section 179 expensing election is now permanent with a $500,000 maximum deduction, and you can take bonus depreciation on new asset purchases at a 50 percent level for 2016 and 2017, 40 percent in 2018 and 30 percent in 2019 before it expires on Dec. 31, 2019.

If it looks like your expenses will exceed your income this year, you can use that net operating loss for tax purposes.

Take advantage of net operating loss flexibility – you can elect to carry back the NOL two years, recouping taxes paid in those earlier, profitable years. You may choose to carry the loss forward for up to 20 years and instead minimize future projected tax liability.

Be sure to run projections and consult your CPA to understand how to best apply these rules for NOLs to your situation.

Late last year, Congress made permanent a benefit to reduce the depreciation period to recover the cost of some building improvements.

Going forward, qualified leasehold improvements, qualified restaurant buildings and improvements and qualified retail improvements may all be depreciated over 15 years, instead of prior longer periods.

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