{"id":35184,"date":"2025-01-18T17:13:26","date_gmt":"2025-01-18T17:13:26","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/best-tax-breaks-for-philadelphia-small-business-owners-in-2020\/"},"modified":"2025-01-18T17:13:26","modified_gmt":"2025-01-18T17:13:26","slug":"best-tax-breaks-for-philadelphia-small-business-owners-in-2020","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=35184","title":{"rendered":"Best Tax Breaks For Philadelphia Small Business Owners in 2020"},"content":{"rendered":"


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This post briefly outlines the best tax breaks available to small business owners who are filing taxes for the 2020 tax year<\/strong>.<\/p>\n

This year, because of the COVID-19 pandemic, there may be a few additional opportunities for those of you who have been asked to work from home, requested a Payroll Protection Program loan, or received contributions from your retirement account. Please check COVID-19: Implications For Philadelphia Residents and Workers<\/a> for more information.<\/p>\n

Fixed Assets Deduction<\/h2>\n

For 2020, the IRS will allow business owners to deduct up to $1,000,000 on fixed assets known as Section 179<\/strong>. That\u2019s twice as much as 2018!<\/p>\n

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Photo by Annie Spratt<\/a> on Unsplash<\/a><\/p>\n<\/div>\n

Section 179 was designed for businesses so most types of business equipment will qualify including computers, off-the-shelf software, furniture, and business-use vehicles. Even some property types are eligible, provided the property meets a specific set of requirements set by the IRS. The only slight caveat is any equipment claimed under this deduction must have been put into use this year.<\/p>\n

The section 179 deduction allows a bigger write off on fixed assets than would normally be allowed. Deductions for Section 179 will reduce income and, therefore, lower the amount of tax owed<\/strong>.<\/p>\n

Defined Pension \/ Profit-Sharing Plan<\/h2>\n

Another big tax break is a Defined Benefit Pension or Profit Sharing Plan.\u00a0<\/strong>When a small business owner sets up a plan, he or she can set aside larger amounts of deductible pension \/ profit sharing payments that will be available for use after retirement. These plans cost more to maintain than a typical SEP (Simplified Employee Pension) or Defined Contribution Plan but can result in a much larger deduction that results in significantly reduced income and therefore, taxes due.<\/p>\n

Personal Vehicle Use<\/h2>\n

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Small Business owners often forget about taking a deduction for their personal vehicle use.\u00a0 If your car is used in business even part of the time (for other than just getting to work), you may be entitled to take a significant deduction for its use.\u00a0 You should be diligent in keeping records and a log to prove its business usage.<\/p>\n

Presently you can take the percentage or actual expenses related to operating the vehicle, or $.580 per mile the vehicle was used for business.\u00a0 Keeping good records is essential to proving this deduction and can result in a much larger deduction than you expect.<\/strong><\/p>\n

Back To Basics<\/h2>\n

The most basic Big Tax Break<\/strong> that is often missed starts when you form your entity.\u00a0 How you are organized and what form you take can have a significant impact on how much tax you pay.<\/p>\n

There are many options such as a C-Corp, S-Corp, LLC, Partnership or Sole Proprietorship can affect how much tax you will ultimately pay. There is no one size fits all. Your choice of entity is dependent on your personal situation.\u00a0<\/em>Just know that an incorrect entity selection could end up costing you extra taxes, year-after-year, so don\u2019t hurry this decision.<\/p>\n

Talk to an accountant if you have questions. It will save you in the long run.<\/p>\n

Last Updated: 12\/11\/2020<\/em><\/p>\n

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