These days, when you are running your own small business, you need to take advantage of every financial opportunity that is available to you. Even if you have a tax professional that you work with frequently, you need also how you can save money on the different kinds of tax deductions. This is especially the case for those of you who are interested in knowing more about tax deductions as it relates to depreciation. As you do your own research, here are 5 things that you need to know about this topic.
#1. Tax Depreciation Deduction can be a little Confusing
Even though you may want to get the greatest benefit from these opportunities, you may not always understand how depreciation and taxes relate to one another. Therefore, you may need to seek out help to obtain a clear explanation. Once you know exactly what these laws entail, you have a much better chance of saving hundreds to thousands of dollars for the tax year. The information that you find that relates to your specific situation is often found on sites like BudgetTaxDep.com.au. These sites can help you to determine how you can use depreciation to reduce your company’s tax burden. These sites can help to provide you a wide range of essential information, including using the right form to file your tax depreciation.
#2. What Items Can Clain Tax Depreciation on
To calculate tax depreciation for the year, you may need to start the process by identifying which items can be added to these figures. For instance, when you are adding up all of the depreciation that applies to your specific circumstances, you need to know exactly what the tax agencies are referring to. Here is a brief listing of items that you should pay close attention to when calculating these amounts.
– Depreciation on the Building facilities that you own
– Depreciation on each computer that the business presently owns
– Deprecation on any equipment machinery that the business owns
– Depreciation that applies to the company’s office furniture
– Depreciated that is associated with the vehicle or vehicle that you are driving
– Depreciation associated with intangible assets like patents and copyrights
#3. Sum Total of Depreciation – Lowers Overall Tax Burden
As referenced above, there are many different assets that you can use to decrease your tax burden. Therefore, you need to know every different type of asset amount that can be added to the sum total amount of the depreciation that is calculated. Once you have added up the depreciation on your office equipment, computers, business vehicles, building facilities, you can use this sum total to determine what amount should be used as a tax deduction.
#4. Straight Line vs Accelerated Method vs Section 179 Deduction
When you decide you want to take advantage of tax depreciation on the buildings or equipment that you own, you need to know more about how these calculations are actually determined. If you have taken even a basic accounting class in the past, you may remember that there are several different types of depreciation methods that can be used in business to arrive at these costs. Additionally, the 3 primary depreciation methods that you need to become familiar with are listed below.
– Section 179 Deduction method
– Straight-line method
– Accelerated Method
Each of these methods requires you to know the initial cost of the asset before you can figure the depreciation for a specified period of time. For instance, if you want to deduct larger depreciation amounts for a particular asset, you may want to use the accelerated method. Actually, for the most part, the small business owner uses the accelerated method to recoup the higher benefits each year. On the other hand, if the small business owner chooses to do so, they may want to take full benefit of the asset cost that they purchased by using the total amount cost of the asset that is being filed.
#5. Hire Professionals to Help You with Best Method for Your Organization
If you really want to get the best benefits allowed by the law, you may want to hire a professional tax specialist to determine which calculations are the best fit for your organization. For instance, a professional tax specialist may recommend, the straight-line method to spread the tax burden out equally each year.
Unnati Vaidya
Unnati Vaidya is a freelancer Content Writer and SEO generalist. She is an enthusiastic reader of Novels and a big fan of watching Sci-fi movies and seasons!