This and the next WealthWISe will open your eyes and fill your pocketbook!

Tax Reform is generally good news for small businesses but in most cases, you have to know about a deduction and act to qualify for it. One exception is the 20% deduction on the lower of business profits or taxable income. It works as long as you don’t make too much. Oh, and don’t incorporate without discussing it with me.

Let’s talk about some tax savers that are frequently missed or underused:

+ vehicle deductions, + new equipment, + home offices, + hiring the kids, + charitable contributions as business expenses, + tax preparation costs for your business, + home equity credit lines used for business purchases. + Itemized deductions that do more good as business deductions. Most taxpayers shortchange themselves on these deductions. Read on!

The IRS has issued 184 pages in proposed regulations explaining the new 20% deduction for domestic income from pass-throughs, which includes one-man businesses and landlords. If your taxable income does not exceed a threshold of $315,000 (joint filers), or $157,500 (all other taxpayers), there are no further limits to this deduction.

Think twice about incorporating — you may be taxed twice!! Now that corporations qualify for a 21% tax rate, everyone is wondering whether they should incorporate. Most taxpayers are better off not incorporating, because corporate earnings can be taxed twice: first on the corporation’s earnings, then to the shareholder when it takes those profits out!

Now for some underused tax savers that I teach my clients to use:

Business vehicles: Clients often underuse their auto deductions. They keep poor records and then they underestimate their business mileage. They overlook additional deductions, like parking and interest on their car loan. Ask me about extra mileage with a home office. Certain large vehicles (more than 6000-pound gross vehicle rating) produce spectacular deductions, using the §179 deduction and bonus depreciation.

Buy and use the equipment before year end. The §179 deduction is available to write off furniture and equipment placed in service before year-end but it cannot exceed profits from the business.

Bonus depreciation. If the §179 deduction is available you may deduct instead up to 100% of assets placed in service this year if first used by the taxpayer.

My Advice: You can save taxes if you depreciate these costs over several years if your income is increasing.

Entertainment. Generally under tax reform entertainment expenses are not deductible. However, business meals in which business is discussed remain at least 50% deductible and may be 100% deductible if included in the price of a business presentation.

My advice: Be alert for expenditures paid with your personal checkbook or credit cards that are actually business deductions, like business gifts, supplies, publications and subscriptions. Purchases at Walmart may be mixed business and personal. Try to tag these:

My advice: Look for normally personal expenditures that help your business, such as cell phones, cable, furniture, and computers.

My advice: Hire the kids. I am a longtime advocate of legitimately hiring your children. You deduct what you pay them. A minor child can earn up to $12,000 without paying taxes and is exempt from FICA and FUTA taxes. If they are older, put them on the payroll. Another advantage, hiring your child can allow you to fund Roth IRA contributions for the child.

The next issue will get into Schedule A Itemized Deductions gambits — when itemized deductions become business deductions.