Page 58 - BusinessWest November 24, 2021

Dollars and Sense
Some Considerations to Keep in Mind as the Year Draws to a Close
By Jim Moran, CPA
With 2021 drawing to a close, it is time for business owners to start thinking about year-end tax-planning oppor- tunities to minimize 2021 taxable income and mitigate the impact of taxes prior to the start of the new year.
Planners are once again faced with the fact that tax reform is still unclear. Congress con- tinues to debate President Biden’s Building Back Better legislation, and revenue raisers are still thinking carefully about how to fund this legislation.
This bill contains numerous tax provisions, but with a divided Congress, it is not known which provisions will end up in the final version. A prudent strategy would be to do year-end tax planning based on the status quo but be flexible based on any last-minute year-end legislation.
Here are items to consider as you proceed, taking into consideration current tax law, includ- ing provisions of the recent CARES Acts passed as a result of the pandemic:
Standard Mileage Rate
The standard mileage rate, for those taxpayers who can use it, is $0.56 for 2021. The IRS mile- age rate for 2022 will be released sometime next month.
Meals and Entertainment
The CARES Act allows a 100% deduction in 2021 and 2022 for meals purchased from a res- taurant. These meals must continue to meet the “ordinary and necessary”
business requirements.
Entertainment, amusement,
and recreation-type events
continue to remain 100%
non-deductible.
Code Section 179 Expensing and Depreciation
The Code Section 179
expense deduction is $1,050,000 for 2021 with a total investment limitation of $2,620,000. Also, 100% bonus depreciation remains in effect in 2021 and 2022. After 2022, the bonus deprecia- tion amount decreases by 20% each year until bonus depreciation is no longer allowed (begin- ning in 2027).
Corporate Limit Increased to 25% of Taxable Income
The COVID relief bills raised the limit to 25% of taxable income through 2021 for cash con-
tributions to eligible charities. The increased deduction does not automatically apply. C-cor- porations must elect the increased limit on a contribution-by-contribution basis.
“A prudent strategy would be to do year-end tax planning based on the status quo but be flexible based on any last-minute year-end legislation.
Increased Limits for Donated Food Inventory
Businesses that contribute food inventory for the care of the “ill, needy, or infants” get
an enhanced deduction in 2021. The previous deduction limit was 15% of the taxpayer’s aggre- gate net income or taxable income. For 2021, business taxpayers may deduct contributions of up to 25% of their aggregate net income or tax- able income.
”
For C-corpo- rations, the 25%
Dollars
Continued on page 60
Melanson specializes in top quality vaulation services coupled with meaningful and valuable business consulting services. Our team consists of both certified valuation analysts (CVAs) and certified public accountants (CPAs) who work closely with you, as well as your legal and banking representatives, on a variety of engagements.
Contact us today to find out how we can partner with you!
Buying or Selling Your Business?
You Need a Business Valuation.
Succession Planning • Increasing Value • Gift & Estate Taxation • Buy-Sell Agreements • Mergers & Acquisitions • Marital Dissolutions • Employee Stock Option Plan (ESOP) • Shareholder Disputes • Chapter S Election • Purchase Price Allocations • Banking Relationships & SBA Loan Funding
Merrimack, NH | Andover, MA | Greenfield, MA | Ellsworth, ME 800.282.2440 | melansoncpas.com
grenierfifinancial.com | Fax: 413 731 7268
Life’s a Journey. L L e e t t u u s s w w a a l l k k t t h h e e r r o o a a d d w w i i t t h h y yo o u u . .
I I t t ’ ’s s w w h h a a t t w w e e d d o o . .
Pat Grenier, Principal
RR, CFP®, MBA [email protected]
MA
One Monarch Place, Suite 810 S S p p r r i i n n g g fifi e e l l d d , , M M A A 0 0 1 1 1 1 4 4 4 4
4 41 1 3 3 7 7 3 3 6 6 6 6 7 7 1 1 2 2
CT
2 6 5 M a i n S t r e e t
W W e e t t h h e e r r s s fifi e e l l d d , , C C T T 0 0 6 6 1 1 0 0 9 9 860 721 7880
S e c u r i t i e s a n d a d v i s o r y s e r v i c e s o f f e r e d
t h r o u g h C a d a r e t G r a n t & C o . , I n c . , a n S E C
R e g i s t e r e d I n v e s t m e n t A d v i s e r a n d m e m b e r F F I I N N R R A A / /S S I I P P C C . . G G r r e e n n i i e e r r F F i i n n a a n n c c i i a a l l A A d d v v i i s s o o r r s s a a n n d d C a d a r e t G r a n t a r e s e p a r a t e e n t i t i e s .
58 NOVEMBER 24, 2021
ACCOUNTING & TAX PLANNING
BusinessWest