Tax Planning Strategies for Manufacturers

Take a look at these effective tax planning strategies that impact manufacturers like you, and see if you have considered them all.

Accelerate Your Expenses

Planning to purchase equipment? Don’t wait until the final days of the tax year. Now is the time to buy or finance those purchases. Changes under the Tax Cuts and Jobs Act (TCJA) allow taxpayers to immediately deduct 100% of the cost of equipment when it is placed in service in 2019. Read more about bonus depreciation.

When was the last time you reviewed your receivables? If you are an accrual basis taxpayer, then you pay taxes based on what is recorded in your accounts receivable. If you have receivables on the books that you know are uncollectible, you might consider writing them off as bad debt.

Have you reviewed your inventory recently? Writing off any obsolete inventory adds value to your business in two ways— it provides a tax deduction and it makes your financials more realistic.

Consider Your Method of Accounting

Under the TCJA, there are now more opportunities for small business owners (defined as average annual gross receipts of less than $25M) to reduce their tax liability and keep more money in their pockets. Such tax planning strategies include changing your accounting method for inventory. Learn more about this and the other major inventory costing changes that significantly impact small manufacturers.

Leverage Retirement Planning to Help Now

By maximizing your retirement contributions, you not only save for your future, but you get a tax deduction right now. Explore the possibilities of a different approach to saving for your retirement.

Another often forgotten but extremely wise way to save for your retirement is through the use of a Health Savings Account (HSA). Contributions to an HSA are tax deductible and as long as the money is used for qualified medical expenses, the growth in the account is not taxable when the money is used. For more information about how much you can contribute to your HSA in 2019, check out our 2019 financial data card (developed in conjunction with HK Financial Services).

Ready to dive deeper into any of these tax planning strategies? Careful consideration must be given to these potential opportunities, as there are many options and considerations to ensure the right path for your company. Contact your manufacturing CPAs to see how these and other strategies can help you improve your business.

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