5 Tax Free Ways to Grow Your Business

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Increase your profits in 2011 by using tax credits and incentives for small businesses to expand your company.

Pay less in taxes as you buy equipment, raise capital or invest in research, by using the following tax breaks meant to stimulate the economy.

1. Invest more into your new business. The maximum deduction for start-up expenses doubled to $10,000 in 2010. Deduct the remaining balance of start-up expenditures over 180 months.
2. Deduct up to $500,000 of the first $2 million in expenses for qualified property in the year in which you begin to use it, rather than depreciating it over several years as previously required. The IRS offers guidance on Section 179 property, including qualifications, under its Instructions for Form 4562. The maximum deduction drops to $125,000 in tax year 2012.
3. Use bonus depreciation to recover a percentage of the cost of new property and equipment.  You can depreciate 100 percent of the cost of qualified property acquired and placed into service after Sept. 8, 2010, and before Jan. 1, 2012 (Jan. 14, 2013, in the case of certain longer-lived and transportation property). You may take the depreciation after any Section 179 deduction and before regular depreciation. Learn the types of qualified property that can be depreciated in the IRS publication “How to Depreciate Property.”
4. Sell stock to long-term investors. Investors who acquire small business stock after Sept. 27, 2010, and before Jan. 1, 2012, may exclude 100 percent of the gains from any future sale or exchange, provided they hold the shares for at least five years.
5. Invest in research. Congress has renewed the research credit that was set to expire in 2010. This expense-based credit allows you to deduct a percentage of the cost of qualifying investments, according to variables such as total expenditures. Consult the IRS’ website for guidance on “Qualified Research Activities.”

Ask your tax professional how you can benefit from these tax credits and incentives now --  for they may be fleeting. Tax breaks meant to stimulate economic growth may not be renewed when they expire in 2012, if the economy is stronger. President Obama and Congressional leaders have already identified tax reform as a priority over the next two years, so expect more changes.

Learn more about these tax free ways to grow your business and how to pay less in taxes by downloading our free whitepaper “Tax Tips for Businesses in 2011.”