Tax Deductions (Business Tax Deduction Tips)
Tax tips and tax help to assist taxpayers by describing options
for tax reduction and tax cuts through lawful tax deductions.
Tax deductions contribute to national prosperity by providing capital to business. Tax deductions reduce taxable income. A $100,000 tax deduction reduces federal income tax by $35,000 ($100,000 X 35%) assuming a 35% income rate. Options for increasing business tax deductions include revising depreciation schedules, reviewing fixed asset listings, casualty losses, bad debts, and charitable contributions.
Real estate depreciation offers substantial opportunity for increasing tax deductions. Most depreciation schedules are established by simply separating land and long-life improvements. This simple approach is lawful but sharply understates lawful depreciation. About 20-40% of improvements for most properties are short-life items. Short life items can be depreciated over 5, 7, or 15 years. There are about 130 short-life items that have been determined by legislation, tax court decisions and IRS rulings.
Real estate depreciation can typically be increased by 50-100% for the first 5-7 years of ownership by obtaining a cost segregation study. A cost segregation study precisely values up to 130 components of real estate that can be valued as short-life property.
By obtaining a cost segregation study, it is possible to obtain a windfall of tax deductions by “catching-up” previously under-reported depreciation. This one-time “catch-up” can occur in the first tax return filed after the cost segregation study is performed without filing any amended tax returns.
Reviewing fixed asset listings (of business personal property) can generate a meaningful amount of tax deductions. They often include items that should have been expensed, which have been sold or thrown away or which have an excessive depreciation life. Items that should have been expensed include operating expenses (sometimes included by error) and maintenance or repairs (which was necessary but did not increase the life of the assets or component.) Section 179 allows business to use up to $108,000 of 2006 capital expenditures as tax deductions. Confirm you are not capitalizing assets that could be claimed as a tax deduction.
Casualty losses also offer opportunity for tax deductions. For a casualty loss, you can deduct: 1) the market value immediately before the casualty less 2) the market value immediately after the casualty less the amount covered by insurance. The portion that is not intuitive is: the market value after the casualty is much less than the value before plus the cost to renovate. Other factors which can and should be considered for tax deductions are: lost rent/usage, stigma (in some cases), construction management, construction risks, and entrepreneurial effort.
Bad debts are a subjective matter. Judgment is required to accurately estimate the amount that should be claimed as a tax deduction. If bad debts have not been examined carefully for several years, they may offer a meaningful tax deduction opportunity. (This applies to companies who utilize accrual accounting. Companies who use cash accounting can’t claim a tax deduction for bad debt since they never recognized the revenue.)
Do well by doing good. You reduce taxes in several ways when making charitable contributions. For example, you purchased land 10 years ago for $200,000, and it is now worth $1,000,000. However, you now realize you will never use the land for the intended purpose. You can donate the land to a qualified charitable organization and take a tax deduction for $1,000,000. However, you do not have to pay capital gains taxes on the appreciation.
Tax deductions sometimes seem arcane and complicated. However, a knowledgeable team of advisors from several fields can reduce your federal income taxes. The complexity of the tax code makes it difficult for any one personal to be knowledgeable in all areas.
Cost segregation produces tax deductions and reduces federal income taxes across the country and in every size market. Below are just a few examples of cities where cost segregation generates meaningful tax deductions.
City:
New York, NY
Houston, TX
Hartford, CT
Las Vegas, NV
Memphis, TN
Philadelphia, PA
Orlando, FL
Phoenix, AZ
Atlanta, GA
Bridgeport, CT
Worcester, MA
Akron, OH
Harrisburg, PA
Salt Lake City, UT
St. Louis, MO
Portland, OR
Scranton, PA
Greenville, SC
Bakersfield, CA
Madison, WI
Chicago, IL
Fresno, CA
Riverside, CA
Albany, NY
Indianapolis, IN
Birmingham, AL
Ft. Lauderdale, FL
Baton Rouge, LA
Augusta, GA
Honolulu, HI
Cost segregation produces tax deductions for virtually all property types, including the following:
Property Type:
Medical facility
Shopping mall
Restaurant
Country club
Fast food restaurant
Power center
Hotel
Car wash facility
Convenience store
Health spa
Almost every industry, including the following, can generate cost-efficient tax deductions by using cost segregation.
Industry:
Golf courses and country clubs
Transportation equipment manufacturing
Electrical component manufacturing
Real estate lesser
Apparel manufacturing
Wood product manufacturing
Plastic and rubber products manufacturing
Furniture stores
Beverage and tobacco product manufacturing
Building supply dealers
O’Connor & Associates is a national provider of investment real estate consulting services including commercial real estate appraisals, business personal property valuations, business purchase price allocations, business valuations, cost segregation studies, due diligence, and insurance valuations. O’Connor & Associates is a national provider of income tax, tax deduction,property tax,real estate consulting, market research,condemnation appraisals,highest and best use,cost segregation,financial modeling,Galveston central appraisal district,Tips and Tricks for Appealing Your Property Taxes in Brazoria,Brazoria county appraisal, and Federal tax reduction. Appraisal services are provided for all commercial property types including nursing homes, discount stores, truck terminals, tennis clubs, supermarkets, country clubs, medical offices, mini-warehouses, restaurants, vacant lands, skating rinks, community shopping, centers, power centers, car wash facilities and service stations.
Patrick C. O’Connor has been president of O’Connor & Associates since 1983 and is a recipient of the prestigious MAI designation from the Appraisal Institute. He is also a registered senior property tax consultant in the state of Texas and has written numerous articles in state and national publications on reducing property taxes. He continues to set the standard in direction and quality of our appraisal products, adding services ranging from business valuations and business appraisals to cost segregation analysis for income tax reduction.
Tax time can be one of the most anticipated periods of the year. After the holidays have become a memory and before the fun of summer begins, we must devote several hours of our lives to completing this project. This can be especially challenging for the home based business owner. There are several deductions that are available for the work from home individual. These ideas can help reduce your tax burden.
1) Accountant Costs
If you use the services of an accountant, these costs are totally deductible for a work at home business.
2) Advertising Costs
Any amount of money that is spent to advertise an internet business is tax deductible. Business cards, flyers, newspaper ads, internet ads, etc.
3) Bank Fees
All of the bank costs incurred to run a home business are tax deductible.
4) Research And Training Materials
Any educational materials purchased to increase your expertise for developing, maintaining and improving a home based business are a tax deduction. This includes software and E-books.
5) Internet Service Provider
Keep a log of the business hours spent online and personal time on the internet. The business percentage can be taken as a tax deduction against ISP costs per month.
6) Web Hosting Fees
The monthly costs paid to a web host provider for managing an internet business site are deductible.
7) Long Distance Telephone Costs
Keep an accurate account of the amount of money spent for long distance phone calls that relate to a home business.
8) Office Equipment
Your computer, printer, fax machine, answering machine, scanner, furniture, remodeling, etc. are tax deductible when used for a home based business. Some people choose to depreciate the cost over several years or take the entire expense at one time. Your tax situation will determine the decision.
9) Shipping Costs
If you ship products, the amount of money spent for boxes, tape, packing peanuts, bubble wrap, etc. is tax deductible. If you use a personal car to transport packages to the post office, keep a log of the distance traveled.
10) Office Supplies
Paper, stationery, folders, pens, pencils, tape, envelopes, printer ink, address labels, post-its, postage stamps etc. that are used for the operation of a home business are a deduction.
11) Interest Expenses
All of the interest accumulated on credit cards for the development, maintenance and improvement of a home based business is a tax deduction. If you have any loans that were taken out to start a home business, this interest is also tax deductible.
12) Office Space
Rent, taxes, mortgage interest, utilities, phone etc are partly deductible. The area devoted to a home based enterprise must be used exclusively for business purposes and the deduction can only be a percentage of the total house costs based on the amount of space the home business uses. Using one room for an office and another room for packaging your products creates a tax deduction for both rooms.
This is not an all inclusive list of tax deductions for your home business. The IRS has a publication (IRS publication 587: Business Use Of Your Home) that clearly defines all of the allowances that you can take. The best approach for completing your tax return is keeping accurate records. The idea of sacrificing several hours of your time for calculating taxes is not very exciting. Unfortunately, it is a task that all of us must face. Good record keeping within the guidelines of these ideas will develop more time for yourself and less time for the IRS when you begin your return.
”The way to get ahead is to start now.”
John Fortner lives in Oregon and works from his home through his online pursuits. He is the owner of Best-Income Opportunities which offers free information and proven opportunities for creating work at home businesses. To learn more about this topic please visit his website at: http://www.Best-IncomeOpportunities.com To receive free information for starting a home business please go to: http://www.Best-IncomeOpportunities.com/optin.html
Tax Deductions for Small Business Owners
Tax tips and tax help to assist taxpayers by describing options
for tax reduction and tax cuts through lawful tax deductions.
Small business owners need all the tax help which is available. Tax deductions allow small business owners to keep more of what they earn. With a 35% marginal tax rate, the government is a silent partner who takes no risk and over one-third of the profits. Tax deductions are neither simple, straight forward, or intuitive. However, the effort to increase tax deductions is well worth the effort.
Tax Help Tip 1: Tax deductions reduce taxable income for small business owners but do not directly reduce federal income taxes. (Tax credits, such as low income housing investment tax credits, directly reduce federal income taxes) Both cash and non-cash tax deductions merit review.
Tax Help Tip 2: Cash disbursements can be expensed (used as a tax deduction in the current year) or depreciated (capitalized and depreciated or amortized over a period of years). Due to the judgment required to determine what should be capitalized, there is some discretion. For example, a local gang paints graffiti on a portion of the side of your building. You decide to repaint the entire side of the building instead of just the portion with graffiti. Is this a repair (can be used as a tax deduction) or should it be capitalized (and depreciated over time)? Some owners would elect to expense repainting the entire building. Business owners should seek counsel from their advisor regarding discretionary tax deductions.
Tax Help Tip 3: Real estate provides bountiful tax deductions for small business owners. Most real estate owners inadvertently understate depreciation and thus forego available tax deductions. The common practice is to simply separate land and long-life property (depreciated over 39 years for commercial property and 27.5 years for rental residential property). Real estate owners can typically increase depreciation by 50-100% in the first 5-7 years of ownership by utilizing cost segregation. Cost segregation can separate up to 130 items that can be depreciated over 5, 7, or 15 years (instead of 27.5-39 years). These short-life items typically comprise about 20-40% of the improvement cost basis. The increased depreciation increases tax deductions.
Cost segregation can be utilized for recently purchased or built properties and for properties owned for a period of years (1/1/87 or later). Long-term real estate owners can claim a one-time tax deduction windfall using catch-up depreciation.
Tax Help Tip 4: After a cost segregation study is prepared, the owner can “catch-up” previously under-reported depreciation (without filing any amended tax returns).
Tax Help Tip 5: Another source of “hidden” tax deductions is a careful review of your fixed asset schedule. Many fixed asset schedule include items which should have been expensed or which have been discarded (or should be thrown away). Misclassified items are another source of additional tax deduction. In some cases the depreciation life for an asset has been overstated through clerical error. A fixed asset audit typically generates meaningful tax deductions.
Other Tax Help Articles: Other non-cash sources of tax deductions are amortization, casualty losses, and charitable contributions, which are addressed in separate articles. Planning tax deductions requires a modest effort but the rewards are worth the effort. You work hard to serve your clients and earn a profit; don’t give more than is legally required to your silent partner.
Click here for a FREE preliminary analysis of income tax savings for your property.
Cost segregation produces tax deductions and reduces federal income taxes across the country and in every size market. Below are just a few examples of cities where cost segregation generates meaningful tax deductions.
City:
Memphis, TN
Baltimore, MD
Las Vegas, NV
Boston, MA
Miami, FL
New Orleans, LA
Atlanta, GA
Washington, DC
Phoenix, AZ
Houston, TX
Albuquerque, NM
Sacramento, CA
Sarasota, FL
Salt Lake City, UT
Albany, NY
Virginia Beach, VA
Oxnard, CA
New Haven, CT
Chicago, IL
Kansas City, MO
Buffalo, NY
Jackson, MS
Tucson, AZ
Raleigh, NC
Dayton, OH
Pittsburgh, PA
Scranton, PA
Jacksonville, TN
Portland, OR
Birmingham, AL
Cost segregation produces tax deductions for virtually all property types, including the following:
Property Type:
Veterinary clinic
Single-tenant retail
Auto dealer
Amusement park
Community shopping center
Convenience store
Airplane hangar
Research and development
Shopping mall
Office warehouse
Almost every industry, including the following, can generate cost-efficient tax deductions by using cost segregation.
Industry:
Arts, Entertainment, and Recreation
Frozen food manufacturing
Real estate lesser
Plastic and rubber products manufacturing
Warehousing and storage
Building supply dealers
Electronic and appliance stores
Food and beverage stores
Durable good wholesalers
Electrical component manufacturing
O’Connor & Associates is a national provider of commercial real estate consulting services including cost segregation studies, due diligence, commercial real estate appraisal, Lease Abstraction-,tax deduction, cost segregation, property tax, market research, estate taxes, Collin central appraisal district, Tips and Tricks for Appealing Your Property Taxes in Dento, denton county appraisal and Federal tax reduction. O’Connor appraisers have appraised over 100 types of real estate including auto service garages, service center warehouses, student housing, shopping malls, subsidized housing, commercial buildings, drugstores, office warehouses, racket clubs, office buildings, cold storage facilities, shopping centers, regional malls, strip shopping centers, used car lots, health spas, auto salvage yards and banks.
Patrick C. O’Connor has been president of O’Connor & Associates since 1983 and is a recipient of the prestigious MAI designation from the Appraisal Institute. He is also a registered senior property tax consultant in the state of Texas and has written numerous articles in state and national publications on reducing property taxes. He continues to set the standard in direction and quality of our appraisal products, adding services ranging from business valuations and business appraisals to cost segregation analysis for income tax reduction.
