Family Business Tax-Saving Moves in the COVID-19 Era
Many family businesses have been adversely affected by the novel coronavirus (COVID-19) pandemic. But there’s a silver lining: Proactive tax planning can help your family business take advantage of potential opportunities in the COVID-19 era. Here are some tax-smart ideas to consider.
Consider Taking Bonus Depreciation for Qualified Expenditures
To survive and possibly even thrive during the novel coronavirus (COVID-19) crisis, your family business might need to spend some money to reconfigure its operations. The good news is that many business assets, which are placed in service in 2020 through 2022, will qualify for 100% first-year bonus depreciation for federal income tax purposes.
Under a technical correction included in the Coronavirus Aid, Relief and Economic Security (CARES) Act, real estate qualified improvement property expenditures are now eligible for 100% first-year bonus depreciation. If you’re considering real estate expenditures to reconfigure or re-purpose space used in the family business, ask your tax advisor if what you have in mind will qualify for 100% first-year bonus depreciation.
If your business is unprofitable this year due to the COVID-19 crisis, a deduction for 100% first-year bonus depreciation can create or increase a net operating loss (NOL) for 2020. If so, that NOL can be carried back as many as five tax years and triggered refunds of income taxes paid for those years.