Tax Deductions (Business Tax Deduction Tips)

Real estate depreciation offers substantialCost segregation produces tax deductions and
opportunity for increasing tax deductions. Mostreduces federal income taxes across the country and
depreciation schedules are established by simplyin every size market. Below are just a few examples
separating land and long-life improvements. Thisof cities where cost segregation generates
simple approach is lawful but sharply understatesmeaningful tax deductions.
lawful depreciation. About 20-40% of improvementsCity:
for most properties are short-life items. Short life- New York, NY
items can be depreciated over 5, 7, or 15 years.- Houston, TX
There are about 130 short-life items that have been- Hartford, CT
determined by legislation, tax court decisions and IRS- Las Vegas, NV
rulings.- Memphis, TN
Real estate depreciation can typically be increased by- Philadelphia, PA
50-100% for the first 5-7 years of ownership by- Orlando, FL
obtaining a cost segregation study. A cost- Phoenix, AZ
segregation study precisely values up to 130- Atlanta, GA
components of real estate that can be valued as- Bridgeport, CT
short-life property.- Worcester, MA
By obtaining a cost segregation study, it is possible to- Akron, OH
obtain a windfall of tax deductions by "catching-up"- Harrisburg, PA
previously under-reported depreciation. This one-time- Salt Lake City, UT
"catch-up" can occur in the first tax return filed after- St. Louis, MO
the cost segregation study is performed without filing- Portland, OR
any amended tax returns.- Scranton, PA
Reviewing fixed asset listings (of business personal- Greenville, SC
property) can generate a meaningful amount of tax- Bakersfield, CA
deductions. They often include items that should- Madison, WI
have been expensed, which have been sold or- Chicago, IL
thrown away or which have an excessive- Fresno, CA
depreciation life. Items that should have been- Riverside, CA
expensed include operating expenses (sometimes- Albany, NY
included by error) and maintenance or repairs (which- Indianapolis, IN
was necessary but did not increase the life of the- Birmingham, AL
assets or component.) Section 179 allows business to- Ft. Lauderdale, FL
use up to $108,000 of 2006 capital expenditures as- Baton Rouge, LA
tax deductions. Confirm you are not capitalizing- Augusta, GA
assets that could be claimed as a tax deduction.- Honolulu, HI Cost segregation produces tax
Casualty losses also offer opportunity for taxdeductions for virtually all property types, including
deductions. For a casualty loss, you can deduct: 1)the following:
the market value immediately before the casualtyProperty Type:
less 2) the market value immediately after the- Medical facility
casualty less the amount covered by insurance. The- Shopping mall
portion that is not intuitive is: the market value after- Restaurant
the casualty is much less than the value before plus- Country club
the cost to renovate. Other factors which can and- Fast food restaurant
should be considered for tax deductions are: lost rent- Power center
usage, stigma (in some cases), construction- Hotel
management, construction risks, and entrepreneurial- Car wash facility
effort.- Convenience store
Bad debts are a subjective matter. Judgment is- Health spa Almost every industry, including the
required to accurately estimate the amount thatfollowing, can generate cost-efficient tax deductions
should be claimed as a tax deduction. If bad debtsby using cost segregation.
have not been examined carefully for several years,Industry:
they may offer a meaningful tax deduction- Golf courses and country clubs
opportunity. (This applies to companies who utilize- Transportation equipment manufacturing
accrual accounting. Companies who use cash- Electrical component manufacturing
accounting can't claim a tax deduction for bad debt- Real estate lesser
since they never recognized the revenue.)- Apparel manufacturing
Do well by doing good. You reduce taxes in several- Wood product manufacturing
ways when making charitable contributions. For- Plastic and rubber products manufacturing
example, you purchased land 10 years ago for- Furniture stores
$200,000, and it is now worth $1,000,000. However,- Beverage and tobacco product manufacturing
you now realize you will never use the land for the- Building supply dealers
intended purpose. You can donate the land to aTax reduction services include federal income taxes,
qualified charitable organization and take a taxstate income taxes and property taxes. We do not
deduction for $1,000,000. However, you do not haveprepare income tax returns. Instead, our advisors
to pay capital gains taxes on the appreciation.review your circumstances and suggest cost
Tax deductions sometimes seem arcane andeffective options to lawfully reduce your income tax
complicated. However, a knowledgeable team ofliability. 5. O'Connor & Associates is a national
advisors from several fields can reduce your federalprovider of commercial real estate consulting services
income taxes. The complexity of the tax codeincluding cost segregation studies, tax reduction,
makes it difficult for any one personal to befeasibility studies, tax return review, apartment
knowledgeable in all areas.inspections .