Deduction Junction Don't let extra money slip between the cracks--plan now for next year's tax filing.

There are probably plenty of things you'd rather do than think about your next tax return. But too many entrepreneurs leave money on Uncle Sam's table by failing to make every deduction that could maximize their opportunities to save. Here are a few things to discuss with your accountant as you plan for next year's filing.

• Expense now, pay later. This year, you can make even more deductions thanks to the Small Business and Work Opportunity Tax Act of 2007, which raised the Section 179 limit from $112,000 to $125,000. "Business owners can buy up to $500,000 in new capital assets--whether it's furniture, fixtures, equipment, computers or software--and get a $125,000 deduction," explains Erika Lewin-Harris, a CPA and business tax consultant with Goldstein, Lewin and Co. If you know you need more expenses to offset your income this year, consider making a capital purchase now rather than in the new year. Do the same with a capital lease: Start the lease in December, make your first payment and take the full deduction now.
• Get your share. In 2005, businesses with "qualified production activities"--any manufacturing done in the U.S.--were given an additional tax deduction. That deduction, which involves a somewhat complex math formula, went from 3 percent of net income to 6 percent of net income in 2007. "Say [your] net income is $1 million; [you] should get a credit for $60,000," explains Lewin-Harris.
• Enjoy spousal simplicity. The Family Business Tax Simplification, also new this year, allows spouses who jointly own an unincorporated business to file as a sole proprietorship instead of a partnership. "It's a much simpler filing mechanism than having to file the partnership return, the two schedule K1s, the schedule E's and all that," says Barbara Weltman, author of J.K. Lasser's Small Business Taxes.
• Give it away. This is one great way to get into the holiday spirit. Instead of selling your excess inventory for pennies on the dollar, consider donating it to a qualified charity. That way, you can deduct up to half the fair market value above the cost of making it and getting it on the shelf. "This is a real [benefit]," says CPA and small-business consultant Judith Dacey, "because this is a deduction you got for something you didn't pay money for."
• Put more away for later. If you haven't already set up a 401(k) or other defined-benefit plan, there's no time like the present since nearly all 2007 contribution limits have gone up. You don't have to fund the new plan; you just have to put it in place before December 31. Since plan options abound, talk to an advisor to determine which is best for your business given its size and number of employees, as well as your age and income level.
• Add perks and save. You might think a flexible spending account is strictly a big-business benefit, but it's actually an economical way to show employees you care while reducing your own payroll costs. By establishing a Section 125 FSA for your employees--who then reduce their salary by setting aside pretax dollars for medical premiums, child-care benefits and the like--you save the 7.65 percent in FICA taxes on the wages set aside, says Dacey. "[Having the plan] more than covers any administrative costs," she says, adding that entrepreneurs benefit most from the plan.
• Don't overpay. Before you make your final estimated federal tax payment, add up your payments thus far and take a preliminary look at what you think you'll owe based on income. While you don't want to underpay, says Weltman, "you want to stop and take a look [at any possible deductions] so you don't overpay, because then you're just making an interest-free loan to the government."