This blog post was updated on December 14, 2020.
Like every year, the shopping season is jam-packed with Black Friday, Small Business Saturday, and Cyber Monday deals. And this year, since most of the holiday shopping has moved online, it seems like every time you open your email or log on to social media you’re being inundated with promotions and discounts. And while you’ve probably already planned out your holiday shopping, what about shopping for your small business?
Small business owners dedicate a lot of time to their customers and improving sales. However, if you want your business to thrive, it’s important that you find ways to invest in tools that will improve it long-term. You can’t expect to rise above your competitors if you are still being held back by less efficient processes and a lack of insights into your strategies.
You’re probably thinking that now is really not the best time to make a business investment of any kind. But the truth is, now is one of the most strategic times to be dipping into your budget. Sure, investing in tools and products will require some fees upfront, but doing so will afford you benefits in the next year that you won’t want to miss out on.
If you are a small business owner that runs a profitable operation, accelerating your expenses for the end of the year could help to offset taxable income. So if you have been planning to make a purchase of any kind, but have been putting it off for the right moment, pulling the trigger now, before the end of the year, can be a good idea for your business.
Now, we know the high from making purchases is very real. However, don’t start adding to your cart just yet. You need to proceed with caution and be specific about the purchases you make if you want to actually offset your taxable income. Luckily, we’re here to help you make sense of some of this so you can determine what you’ll want to go over with your tax professional.
Broken up into two categories (fixed assets and operations), here are some six small business investments business owners should consider before the new year:
Fixed Assets
Fixed asset expenses – you know, those big-ticket investments that are intended to last a long time for your business – may be depreciated over time. However, for small businesses, the Section 179 business tax deduction allows you to deduct more than the depreciated amount – up to $1,040,000 for 2020. As an added bonus, Congress has raised the deduction limit significantly every year for the past decade or so. For instance, last year, they extended the deduction limit to $100,000,000 – that’s a huge small business tax write off! This typically happens at the last minute, so while there’s no guarantee the deduction limit will be raised this tax year, the odds are in your favor.
While we’re here to help offer you some tips, remember, we are not tax experts. Before making any small business investment, you should always consult your tax advisor or a tax professional. You’ll want to ensure that whatever purchase decision you make is one that will benefit you business and offer the right strategy for taking fixed asset deductions for your business.
Here are a few fixed assets to consider purchasing this year:
Equipment
The end of the year is a good time to take a look around and see which equipment is no longer working at optimal performance. Farm implements, wide format printers, manufacturing equipment, restaurant-grade freezers, and ovens, etc., – if you’re planning on adding some expensive equipment fees to your credit card in the upcoming year, consider bumping your equipment purchase up to December.
Vehicles
Purchasing a company car? Adding a food truck to your restaurant? Or, maybe it’s time to get a truck or van added to your fleet. Again, make your purchase before the end of the year to help offset your business income tax and keep more of your money when your 2020 business tax bill comes in 2021.
Property or Real Estate
Expanding your business is always an exciting milestone. Perhaps you’re opening a new location or expanding your business into new regions. Or, maybe you’ve chosen to upgrade by moving to a bigger and better location. Whatever your growth plan looks like, if it involves a real estate purchase, you may want to get it in ASAP. Real estate purchased before January 1st is another fixed asset your business can deduct from your 2020 taxes.
Operations
Not every small business can take advantage of Section 179 deductions for fixed assets in 2020, but even those smaller investments can add up to deductions. So, tally up any operational fees you may need to make and consider taking the plunge sooner rather than later.
Technology
Whether you’re planning on upgrading systems, investing in new financial software, or maybe even taking a stab at small business marketing automation in 2021, make your business investment now in 2020. Not only will it be another expense you can deduct, but getting your technology sorted out now means you can start the new year with a clean, streamlined slate to make it the best year yet for your business.
To give small business owners even more incentive to invest in sales and marketing technology before the year is out, BenchmarkONE is offering 10% off when you sign up for semi-annual billing of any of our plans by December 31st, 2020. If you’re even slightly considering upgrading your sales and marketing software, now is a great time to watch a demo and check it out!
Supplies
Printer paper, ink, post-its, and paper clips…stock up now on the essentials that keep your business running smoothly. Getting everything you need now means you won’t have to stop for an office supply run for a while, so you can concentrate on getting your year off to a good start.
Projects
Planning a rebrand in 2021? Need to redesign your website? Digitizing all of your old files for easy access and less storage? If you can tick a few of your 2021 projects off your list now before the year is out, you’ll be in a better spot when the new year starts – and can deduct the expense for 2020.
If you’re looking for more tax tips for your business and hiring a tax professional isn’t an option, Freshbooks has a whole section dedicated to small business resources on their blog. And, of course, always consult a tax expert to make the best bookkeeping and tax decisions for your business.
For profitable small businesses, it’s all about smart spending at the end of the year. Consider making your investments now instead of waiting for the next tax year. Not only will you benefit from the 2020 tax deductions, but (and maybe more importantly), you’ll be positioned to start the 2021 tax year off with a bang. Just remember, consult your tax advisor or a tax professional before making any big decisions.