The end of the year is fast approaching; keep more of your money instead of paying it out in taxes.
I often hear accountants recommend spending your money, so you have fewer taxes. I disagreed because the more you spend, the less cash/capital you have.
However, some scenarios would justify spending to avoid taxes; here is one.
Buy assets you are going to need for the upcoming financial year.
Let’s take this example (All prices in JMD).
If your net profit was $1M, you would have to pay $250K (25%) in taxes, leaving you with $750K in value.
But if you were to buy an asset for $500K, your net profit would now be $500K, and your taxes would be $125K, leaving you with $375K in cash.
But remember you bought the asset for $500K, so when combined, the total value (in your books) you have is $875K
$875K > $750K
If you bought the asset next financial year (after paying your taxes), you would have $750K – $500K; you would have $250K in cash.
$375K > $250K
So with some planning ahead, get next year’s assets in this financial year.
Capital allowance also needs to be considered; that’s a discussion for another time.
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3 replies on “End of the year tax savings”
Love the fact that you said get next year’s asset in this financial year. Very wise Bro.
Excellent practical advice and simply put…. appreciated!!
This is useful but one needs to remember that an asset is not an expense, and you cannot claim an asset in its entirety in one year. Capital Allowance will be given which can be 20% of the cost of the asset depending on the type of asset. This can be applied however to items that are considered as expenses such as a staff retreat. Thank you for your tip.