As the year comes to a close, those handling the finances of a business are thinking about the final year-end spends to help reduce their tax liability. The average small business is set up in a way that business income, whether the owner personally takes it or reinvests it into the business, passes the tax liability to the personal return of the owner.
This can result in a HUGE tax being owed by the proprietor. However, you can help lower your federal tax responsibility with smart end-of-year purchases.
The smarter businesses make purchases for equipment and items that they will actually need in the near future. This end of year spending helps reduce their business income for that tax year, allowing for a lower tax responsibility.
One end of year investment companies should consider is promotional products.
If your marketing director (a.k.a. small business owner in many cases) has done his/her job, there is already a plan in place to promote the business over the next 6-12 months. That plan details out the advertising needs to increase the growth of your company.
Promotional products are no doubt a part of that plan. So as an opportunity to lower your business income for the year, spending extra money on promotional items is a great strategy. Yes, promotional products and business gifts (up to $25) are deductible.
See the specific details from the IRS on Giving Business Gifts including how much can be deducted. For advertising expenses for your business, the IRS states, “You generally can deduct reasonable advertising expenses that are directly related to your business activities.”
Even better than lowering your tax liability is the opportunity to grow your business further with the purchased promos.
However, having a plan for the promotional items is key. These items have a tremendous power to strengthen business relationships and grow your business if used strategically. Use them effectively and your business WILL benefit!
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