Members login
Tax Tips and Strategies for 2009 and 2010
Written by article default Tuesday, 15 December 2009 11:39
You may have looked at the title of this article and said, "Why is Diana, our real estate expert, talking to us about taxes?" Even though I've spent the last 20 years as a real estate investor and educator, my career began with a degree in accounting and a five-year assignment to the tax department of a national accounting firm.One of the sections that I teach in the two day real estate class is dedicated to tax strategies related to real estate. Although no investing decisions should be made based strictly on the tax consequences, it is a very important component. So one of the first things I would suggest you do is make sure you have a professional tax advisor that understands all of the different elements of your business, investing and personal finances.
Here are a few tips, tax breaks and strategies that you can use as we approach the end of 2009 and going forward to 2010.
PLEASE MAKE SURE YOU SEEK THE ADVICE OF YOUR TAX ADVISOR REGARDING ANY OF THESE SUGGESTIONS.
If you're looking for additional deductions and expenses related to your business, here are a few that you might consider making before the end of 2009:
Business Equipment: The American Recovery and Reinstatement Act of 2009 has increased the expensing of some capital assets. When you buy business equipment, you usually deduct the purchase price over several years. Section 179 of the tax code allows small businesses to take full depreciation in the year of the purchase, known as expensing. For 2009, you can expense up to $250,000 worth of equipment (about double the previous allowed limit). To get the deduction for this tax year, the equipment must be operating by December 31.
Cost of Education: To maintain or improve skills required in your current business.
Charitable Contributions: You can either donate cash or other items. Under the new Pension Protection Act, you will need a written receipt for all charitable donations.
Pre-pay Property Taxes: Pre-pay (some or all) of 2010 taxes.
Make an extra mortgage payment: The extra interest you pay will be added to this year's mortgage interest by your lender, increasing your itemized deductions.
Medical expenses: You can take a deduction for medical expenses exceeding 7.5% of your adjusted gross income (AGI).
Max out your retirement savings: Contributions to retirement plans reduce your taxable income. A contribution to your IRA can be $5000, or if over 50 years old $6000. And you have up to April 15, 2010 to make the contribution for 2009.
Go Green: An example of going green would be installing solar panels. The government will give you a 30% credit. You can also get a 30% tax credit (up to $1500) for smaller projects like energy efficient windows and doors.
Boosting your deductions is a great way of lowering your tax liability; you may also want to consider the income side of your taxes. Here are a couple suggestions:
Defer income, if possible: If self-employed or a business owner, you might elect to invoice customers in January so you don't have to include that income in 2009. Keep in mind that it may only make sense to defer income if you think you will be in the same or a lower tax bracket next year.
Sell losing investments to offset capital gains: You can lower capital gains by selling securities that have lost money. Losses offset gains dollar-for-dollar and losses in excess of your gains can be deducted, up to $3000 dollars per year.
I strongly believe that success in business and investing start with planning. I have witnessed many friends, family and students that have been surprised on April 15th by a tax burden they weren't prepared for simply because of a lack of knowledge and planning.
Once again please make sure that you contact your tax advisor to evaluate how these suggestions can best serve you.