Archive for the ‘Taxes’ Category

Tax Deduction For Alimony - Is Alimony Tax Deductible

Sep 11, 2008 Taxes

If you have already divorced and are required to pay alimony, it is deductible. You do not have to have other itemized deductions greater than the standard deduction as it is treated as a direct deduction from gross income.

If you are going through a divorce, now is an opportunity for some sound tax planning. While alimony can be deducted from your gross income for tax purposes, child support cannot. Of course, the trade off is that the spouse who receives alimony must recognize it as income - but often it is the case that the parties are better off from a tax stand point if alimony is paid instead of child support because the person paying the alimony is in a higher bracket than the person receiving it.

If you would be ordered to pay $500 per month ($6,000 per year) in child support but no alimony, it may serve everyone well if you agreed to pay even $625 per month ($7,500 per year) in alimony with no child support Then, if your federal and state taxes combine to take 40% of your income, you would end up saving $1,500 per year, and your ex-spouse could net more than the $6,000 that would have been paid otherwise. How?

A $7,500 deduction for alimony would reduce your tax liability by $3,000 ($7,500 * 40%), leaving your net costs at $7,500-$3,000=$4,500. If you had child support instead, it would have cost you $6,000 - with no tax deduction. If your ex-spouse is in a lower tax bracket, she may end up receiving more than the $6,000 she would have received in child support.

There is one important risk in this idea though - alimony is not usually reduced because of a drop in income while child support normally is.

There are many new tax questions a divorce presents.

You can go to Turbo Tax Online, and get the latest and best updates for tax deductions such as alimony. When you prepare and file taxes online, you save money, get quick refunds and win all the way around. Or, consult with a professional like Elusen Tax Advisors today to be sure you are taking advantage of all the deductions and tools you have available for reducing your taxes.

Tax Deduction Checklist For 2008, 2009

Sep 11, 2008 Taxes

Tax Deduction Checklist

The best tax deductions checklists are found in three places:

Your past years’ tax returns; With your tax professional; and Through an online tax website

Past Years’ Returns

Just by looking at the deductions you have been able to take in the past, you will get a good idea of what deductions you can take this year. If you had mortgage interest, real estate taxes, IRA contributions, and charitable contributions last year - you probably have them this year as well. The same is true of medical expenses, various taxes, that safe deposit box you keep, and if you are required to pay certain expenses, like alimony. Finally, any business deductions you have taken in the past, for a home office, travel, mileage, etc. is likely to follow a pattern you have created and budgeted consistently.

Tax Advisors

Tax professionals are great at helping you identify deductions for one time occurrences and helping you organize your records and thoughts on how to approach the deductions that are available. You may need advice on issues that you have never faced before and those that run the risk of gaining or losing large sums of money. If so, your tax advisor is a great resource for addressing these issues.

Online Help

TurboTax Online, for example, has exceptional checklists for going over everything you need to consider before preparing your return and making sure you don’t miss anything important. It asks interactive questions, points out possible deductions you may forget, and reminds of the things you need to have or consider when taking a specific deduction.

When you prepare and file taxes online, you save money, get quick refunds and a great process for making sure you get all the deductions you deserve. Try Turbo Tax Online for Free. If you do not already have a tax professional and need direct, low cost guidance, contact Elusen Tax Advisors today to be sure you are taking advantage of all the deductions and tools you have available.

Tax Help For Small Business Owners

Sep 11, 2008 Taxes

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.

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 investment real estate consulting services including commercial real estate appraisals, comparable sales land abstraction, comparable sales units of measure, business purchase price allocations, business valuations, cost segregation studies, due diligence, and insurance valuations. 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.

Tax Deductions (Business Tax Deduction Tips)

Sep 11, 2008 Taxes

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

Tax reduction 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 lawfully reduce your income tax liability. 5. O’Connor & Associates is a national provider of commercial real estate consulting services including cost segregation studies, tax reduction, feasibility studies, tax return review, apartment inspections . O’connor associates services includes business valuation tax deduction, due diligence, income tax, tax reduction, property tax, feasibility studies, real estate consulting, market research, Denton Central Appraisal District, Tips and Tricks for Appealing Your Property Taxes in Collin, Collin county appraisal, Federal tax reduction

Patrick C. O’Connor

http://www.poconnor.com/

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Tax Reduction (Casualties Can Generate Substantial Tax Reduction)

Sep 11, 2008 Taxes

Tax reduction are the results from tax deductions. Tax deductions reduce taxable income but do not directly reduce federal income taxes. For example, $100,000 of tax deductions reduces federal income taxes by $35,000 ($100,000 X 35%), assuming a 35% tax rate. Most tax reduction require a cash expenditure (labor, material, supplies, utilities, etc). A current period cash expenditure is not required for some real estate tax deductions and may not be required for a casualty loss.

A casualty loss may occur as a result of a flood, hurricane, tornado, mudslide, or other natural disaster. The intuitive thought pattern is: “My apartment complex worth $5,000,000 suffered major damage totaling $1,500,000 for repairs and rent loss. Fortunately, I was completely covered for both physical damage and rent loss, other than a small deductible. There is clearly no casualty loss which will generate tax reduction, right?”

Most real estate owners and investors believe the above statement to be true. Few investors claim the casualty loss tax reduction the federal income tax code allows them. Let’s next review the criteria for a casualty loss tax deduction and the thought process regarding acquisition of a property that has suffered a casualty.

Real estate owners suffer a casualty loss when the market value immediately after the casualty plus insurance proceeds is less than the market value immediately before the casualty. The complex issue is how to value the property immediately after the casualty. Let’s consider a 1-story suburban office park in Mississippi which suffered 3-feet of flooding due to Hurricane Katrina. Let’s further assume: 1) 8 feet of sheet rock must be replaced in the entire property to rebuild, 2) although the property was 90% occupied before the flood, occupancy is expected to only be 5% while rebuilding occurs, 3) stabilized occupancy after renovation is not clear since some businesses may not return, 4) construction will take 12-18 months due to the labor constraints and 5) the owner has casualty insurance to rebuild but did not have rent loss/business interruption insurance.

It is clear the market value after the casualty is less than the market value before the casualty less construction costs. Other factors to consider are: rent loss, market risk that not enough tenants will be available after construction is completed, cost of construction management, a illiquid market with few buyers just after the casualty, construction risk, interest rate risk (rates could rise during the construction period negatively affecting value), risk that operating expenses could increase during the construction period (perhaps insurance) and compensation for entrepreneurial effort to induce a buyer to coordinate labor capital, management and endure the previously mentioned risks.

A careful analysis by an appraiser might show the improvements have no value after the flood. In appraisal assignments performed by the writer, a casualty loss of 10-30% of the market value before the casualty has occurred (in a straight-forward, defensible analysis) is typical. This can generate a meaningful casualty loss tax deduction which results in tax reduction.

For example, a property with a market value of $5,000,000 suffers a 30% casualty loss. While the casualty is a serious hardship for the owners, the $1,500,000 ($5,000,000 X 30%) tax deduction will mitigate the financial loss. Based upon a 35% tax rate, the tax reduction is $525,000.

Congress provided a casualty loss tax deduction to encourage investment in real estate. If you have the misfortune to suffer a casualty loss, take the helping hand offered by congress and take the tax deduction.

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
  • San Francisco, CA
  • New Orleans, LA
  • New York, NY
  • Hartford, CT
  • Las Vegas, NV
  • Los Angeles, CA
  • Atlanta, GA
  • Orlando, FL
  • Miami, FL
  • Louisville, KY
  • Salt Lake City, UT
  • Boise, ID
  • Lakeland, FL
  • Wichita, KS
  • McAllen, TX
  • Columbus, OH
  • Ft. Lauderdale, FL
  • San Antonio, TX
  • Durham, NC
  • Allentown, PA
  • Youngstown, OH
  • Little Rock, AR
  • Greensboro, NC
  • Greenville, SC
  • Kansas City, MO
  • Raleigh, NC
  • San Jose, CA
  • Palm Bay, FL
  • Honolulu, HI

Cost segregation produces tax deductions for virtually all property types, including the following:

Property Type:

  • Regional mall
  • Service station
  • Drugstore
  • Night club
  • Supermarket
  • Racket club
  • Auto service garage
  • Airplane hangar
  • Nursing home
  • Subsidized housing

Almost every industry, including the following, can generate cost-efficient tax deductions by using cost segregation.

Industry:

  • Nondurable good wholesalers
  • Durable good wholesalers
  • Day care facilities
  • Computer and electronic manufacturing
  • Health care facilities
  • Chemical manufacturing
  • Printing activities
  • Warehousing and storage
  • Electronic and appliance stores
  • Apparel manufacturing

O’Connor & Associates is a national provider of commercial real estate consulting services including cost segregation studies, due diligence, insurance valuations, tax deduction tax reductions, cost segregation, market study, feasibility studies, property tax, market research, condemnation appraisal, gift tax, lease abstraction, casualty loss, Fort Bend Central Appraisal District, Tips and Tricks for Appealing Your Property Taxes in Harris, Harris county appraisal, and Federal tax reduction. Our appraisers have experience with all types of property including department stores, research and developments, lumber storages, fast food restaurants, convenience stores, retail centers, airplane hangars, lodgings, daycare centers, hotels, truck stops, manufacturing/processing facilities, greenhouses and auto dealers.

Patrick C. O’Connor

http://www.poconnor.com/

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