
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
About the Author:
The Market Research and Consulting division of O’Connor & Associates benefits those who are involved in commercial property investing. Statistical data, ownership and management information is routinely gathered for four major land uses – multifamily, office, retail and industrial. This information allows investors to compare competitive properties, facilitate business decisions and track market and submarket performance. In addition the data is useful to brokers who for example continually monitor Houston retail center leasing, Houston office center leasing, Houston industrial center leasing, Houston apartment rental, Dallas apartment rental, Ft. Worth apartment rental, Austin apartment rental, San Antonio apartment rental. This capacity to research, analyze and interpret market trends and the impact of specific transactions is a major reason for why developers and acquisition experts rely on O’Connor & Associates for tax deductions, cost segregation, property tax appeals, property appraisal, & lease audits.
Article Source: ArticlesBase.com – Business Tax Deduction Tips
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