irs business tax deduction categories

irs business tax deduction categories

Cost Segregation - Tax Deductions (Tax Rule No.1: Don't Cheat The Irs )

Tax Rule No.1: Don't cheat the IRS. But that doesn't mean you should cheat yourself. Take every legal tax deduction you can.

In addition to the numerous tax deductions the Internal Revenue Service allows, research indicates that most U.S. taxpayers do not claim all deductions to which they are entitled. Some of the tax deductions business owners can claim fall under categories such as charitable contributions/donation deductions, medical and dental deductions, moving expense deductions, deducting job costs, travel and entertainment expense deductions, and casualty and theft losses, depreciation and involuntary conversion deductions.

Owners of investment real estate can take advantage of a depreciation technique called cost segregation that could save them hundreds of thousands of dollars in federal income tax this year. It does so by increasing their depreciation and reducing their income tax rate from 35 percent to as little as 15 percent. It can also help defer payment of much of the tax until a building is sold.

Typically, the increased depreciation in early years of ownership can offset much of the income derived from the property. When depreciation advantages expire, the property can be sold, and taxes are paid at the capital gains rate of 15 percent. In such cases, this defers income taxes by five, 10 or even 15-plus years.

Cost segregation involves separating up to 135 components of real estate that depreciate faster than the building itself. Most investors fail to identify all of them. A real estate appraiser can accurately value and document those five-, seven- and 15-year items. Such items typically represent 20% to 40% of the total cost. Properly depreciating each can increase depreciation by 50% to 75% during the early years of ownership.

Cost segregation simply helps the property owner achieve accurate and timely depreciation instead of deferring much of it for 39 years (for commercial property) or 27.5 years (for apartments). Imagine waiting thirty-nine years to depreciate carpet that wore out after five! Incredibly, that is what most owners do. Don't cheat yourself, take all lawful deductions.

O'Connor & Associates is a national provider of commercial real estate consulting services including cost segregation, federal tax reduction , due diligence, renovation upgrading cost analyses, tax return review and apartment inspections.

About the Author

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 sa 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.

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http://www.poconnor.com

Can I deduct the cost of vitamins, nutrition supplements, and alternative therapies from my Income Tax if...?

...I am a professional speaker on the topic? I advocate the use of these lifestyles, therapies, and products for health, wellness, and slowing the aging process. I definitely practice what I preach. I use/do everything I recommend in my speeches. I am in my mid-50s and look (and act) much younger.

I know that I am a walking promotion for my speaking business and that my appearance and behavior validates my expertise/opinions in the audience's eyes. Therefore, I have to believe that my personal use of vitamins, supplements, and other alternative therapies should fall under the category of a business expense and be tax deductible. I am told by colleagues that this is "probably" true, but no one can give me any hard data to back up that claim.

If you agree (or disagree), can you give me the references I would need and could use if the tax deductions are ever challenged by the IRS.

Thank you for you help.

The products you "take" yourself are not deductible, since they are personal in nature. The rationale is the same for your suits and personal appearance. You need to have nice clothes and have your hair cut etc for your speaking engagements, but they aren't deductible either. You could wear that suit for something other than a speaking engagement. The supplements help you in other areas of your life, not just your professional one. However, you can deduct any supplements you use as samples or displays, that are not available for sale. If you have pills that are available for sale (inventory) they are deducted when sold.

Payroll Software 2010 withholding tax - http://payroll.breaktru.com

 

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irs business tax deduction categories

Filed under: Tax Deductions

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