Tax Deductions (Business Tax Deduction Tips)
Real estate depreciation offers a substantial opportunity to increase tax deductions. Most depreciation schedules are set simply by setting aside land and long-term improvements. This simple approach is legal but drastically underestimates legal depreciation. About 20-40% of upgrades for most properties are short-lived items. Short-lived items can be depreciated over 5, 7, or 15 years. There are about 130 short-lived items that have been determined by legislation, tax court decisions, and IRS rulings.
Typically, real estate depreciation can be increased by 50-100% for the first 5-7 years of ownership by obtaining a cost segregation study. A cost segregation study accurately values up to 130 components of real estate that may be valued as short-lived property.
By obtaining a cost segregation study, it is possible to obtain a windfall of tax deductions by “catching up” on previously underreported depreciation. This one-time “catch-up” can occur on the first tax return filed after the cost segregation study is completed without filing any amended tax return.
Reviewing fixed asset (business personal property) listings can lead to a significant amount of tax deductions. They often include items that should have been worn out, have been sold or scrapped, or have excessive depreciation lives. Items that should have been expensed include operating expenses (sometimes included in error) and maintenance or repairs (which were necessary but did not increase the useful life of assets or components). Section 179 allows businesses to use up to $108,000 of 2006 capital expenditures as tax deductions. Confirm that you are not capitalizing assets that could be claimed as a tax deduction.
Casualty losses also offer the opportunity for tax deductions. For a casualty loss, you can deduct: 1) the market value immediately before the casualty minus 2) the market value immediately after the casualty minus the amount covered by insurance. The part that is not intuitive is: the market value after the loss is much less than the previous value plus the cost of renewal. Other factors that can and should be considered for tax deductions include: lost rent/use, 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 to be claimed as a tax deduction. If bad debts have not been carefully examined for several years, they can offer a significant tax deduction opportunity. (This applies to businesses that use accrual accounting. Businesses that use cash accounting cannot claim a bad debt tax deduction because they never recognized the revenue.)
Do good by doing good. You reduce taxes in several ways when you make charitable contributions. For example, you bought land 10 years ago for $200,000 and it is now worth $1,000,000. However, you now realize that you will never use the land for its intended purpose. You can donate the land to a qualified charity and take a $1,000,000 tax deduction. However, you do not have to pay capital gains tax on the appreciation.
Tax deductions sometimes seem arcane and complicated. However, a team of expert advisors in various fields can lower your federal income taxes. The complexity of the tax code makes it difficult for anyone to be knowledgeable in all areas.
Cost segregation produces tax deductions and reduces federal income taxes across the country and in markets of all sizes. Here are some examples of cities where cost segregation leads to significant tax deductions.
City:
- New York, NY
- Houston, TX
- Hartford, CT
- Las Vegas, NV
- Memphis, TN
- Philadelphia, Pennsylvania
- Orlando, Florida
- Phoenix, Arizona
- Atlanta Georgia
- Bridgeport, CT
- Worcester, Massachusetts
- Akron, Ohio
- Harrisburg, Pennsylvania
- Salt Lake City, UT
- Saint Louis, MO
- Portland, Oregon
- Scranton, Pennsylvania
- Greenville, South Carolina
- Bakersfield, Calif.
- Madison, Wisconsin
- Chicago, IL
- Fresno, Calif.
- Riverside, Calif.
- Albany, New York
- Indianapolis, IN
- Birmingham, Alabama
- Lauderdale, Florida
- Baton Rouge, LA
- Augusta, Ga.
- Honolulu, Hello
Cost segregation produces tax deductions for virtually all types of property, including the following:
Kind of property:
- Medical Center
- Mall
- Restaurant
- Country club
- fast food restaurant
- power center
- Hotel
- car wash facility
- convenience store
- health spa
Almost all industries, including the following, can generate profitable tax deductions through cost segregation.
Industry:
- Golf courses and country clubs
- transportation equipment manufacturing
- Manufacture of electrical components
- Minor Real Estate
- clothing manufacturing
- Manufacture of wood products
- Manufacture of plastic and rubber products.
- furniture blinds
- Manufacture of beverages and tobacco products
- Building Supply Distributors
Tax relief services include federal income taxes, state income taxes, and property taxes. We do not prepare income tax returns. Instead, our advisors review your circumstances and suggest cost-effective options to legally reduce your income tax liability. 5. O’Connor & Associates is a national provider of commercial real estate consulting services including cost segregation studies, tax abatement, feasibility studies, tax return review, and apartment inspections. O’connor’s associate services include business valuation tax deduction, due diligence, income tax, tax abatement, property tax, feasibility studies, real estate consulting, market research, central appraisal district of Denton, tips and tricks to appeal your Collin property taxes, Collin county appraisal, federal tax abatement