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While many people deposit their check into their savings account or indulge in a shopping spree or night out, others may choose to donate theirs to those in need. If you’ve received a stimulus check but don’t need it, donating the money is a great way to give back — and you can get a tax break if done properly. Here’s what you need to know.

How to donate your stimulus check

Spend it on local small businesses in your community

Many local small businesses have been affected by the pandemic. Limited in-person traffic, changing customer needs, and overall fewer resources have made it difficult for smaller shops to stay open. By putting your stimulus check toward a local small business, you can directly impact your local economy and make a significant impact on companies that may be struggling right now.

Donate to those in need who don’t qualify for stimulus checks

Eligibility for stimulus checks is largely determined by income. However, not everyone who falls under a certain income threshold will qualify. Some people, including immigrants and those claimed as dependents, may face financial hardship but not qualify for a stimulus check. If you aren’t using your funds, donating them to those in need can directly improve their financial situation.

Look up credible charities

Charities rely largely on the generosity of donors to support their mission. By making a charitable donation to an organization whose cause matters to you, you can ensure that your funds are going toward the greater good. Before making any payments, do your research to ensure that the charity is credible.

How to get a tax break by donating your stimulus check

Donating your stimulus check is not only a great way to give back to those in need, but you can also get a tax deduction in the process. Here’s how to do it:

Donate to qualified/eligible charities 

For your donation to qualify for a tax break, it must go toward an organization that is eligible to receive tax-deductible charitable contributions. You can look up qualifying charities on the IRS’s Tax Exempt Organization Search. Donating money to a family or individual does not qualify for a tax deduction.

Itemize deduction on your return

Generally speaking, you will need to itemize your donation as a deduction on your return to receive a tax break. However, the Coronavirus Aid, Relief, and Economic Security (CARES) Act has established new provisions on charitable giving. Under the CARES Act, you can claim an above-the-line deduction of up to $300 on your tax return for any qualifying organization. These provisions do not apply to contributions to supporting organizations or donor-advised funds.

Provide a record of the donation

Your donation can be made through any means of payment (cash, check, or credit card). However you contribute, you must get a record of the donation. You can ask the organization to provide a receipt, email, or letter that includes the amount and date of your contribution.

Need tax help? Call Miller & Company.

If you’ve donated your stimulus check and aren’t sure how to report it on your taxes, you don’t have to go it alone. Miller & Company’s experienced CPAs can help you file your 2020 tax return and ensure you get the appropriate tax deductions for charitable contributions. Contact us today for a consultation.

The short answer is yes — but only if you also use that home office for self-employed business activities. Here’s what you need to know if you’re a remote worker with a home office.

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What is the home office deduction?

The home office deduction is for people who use part of their home as their primary workplace. You can deduct certain business expenses for your home office, regardless of whether you rent or own your home.

The catch? This deduction is only available to those who are self-employed. In other words, if you’re a W2 employee who is working remotely, you are not eligible for this deduction unless you have additional self-employment income.

If you meet the self-employment requirement, there are two basic criteria that would qualify your space for a home office deduction. They are:

1.     Regular and exclusive use

To qualify for the deduction, you must regularly and exclusively use a space in your home for work. If you have a designated room or area in your home that is solely used for business, you are eligible to take the home office deduction. If you work at the kitchen table or on the couch, this does not qualify as “exclusive space,” as these areas are used for everyday living.

2.     Principal place of your business

Your home must be the principal place that you conduct business in. As an example, you can meet with clients at other locations, so long as your home is the principal setting for your business. Freestanding structures that are on your property, such as a studio or garage, that are used as your primary place of business are also eligible.

Employees versus self-employed individuals: Who’s eligible?

Now that the vast majority of people are working from home due to the coronavirus pandemic, you might think you’re entitled to some tax deductions as your home now doubles as your office.  Previously if you were a W2 employee who worked from home all or most of the time, you were able to deduct your home office expenses through line 21 of Schedule A. This changed with the Tax Cuts and Jobs Act of 2017 (TCJA).

Once TCJA was passed, W2 employees could no longer deduct home office expenses. Now these deductions only apply to self-employed individuals and independent contractors. During their annual tax filing, these taxpayers can file their home deduction on IRS Form 8829, which is filed under their Schedule C on their 1040.

Get help with your home office deduction from a trusted CPA.

If you’re a self-employed person who works out of their home this year and needs insight as to how you can deduct expenses, contact the experts at Miller and Company. We can connect you with one of our expert CPAs for a consultation to see what you’re entitled to and how you can qualify for the home office deduction.

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However, it’s important to start saving for retirement as early as possible so you can take advantage of compound interest and grow your “nest egg” decades before you need it.

Here are six ways you can prepare for retirement when you’re in your 20s.

1. Open an IRA or 401(K) and take advantage of employer contribution matching, if available.

If your employer offers any kind of retirement savings account, such as an IRA or 401(k), sign up for it right away. At minimum, start by contributing what your employer will match, if applicable. Your employer’s contribution is essentially free money that you are leaving on the table if you don’t take the offer. Should your employer not offer a retirement savings plan, contact a trusted financial institution to open up your own IRA. In either case, the more you can afford to contribute early on, the better. 

2. Don’t be too conservative with your investments.

The younger you, the more aggressively you’ll want to invest with your retirement portfolios. In your 20s, you’ll have plenty of time to ride out any downturns in the market. As you get older, you can adopt a more conservative investing strategy to protect what you have saved. 

3. Focus on paying down credit card debt.

Paying down debt can seem like an impossible task when you don’t make a lot of money. Ideally, you should try to avoid using credit cards in the first place unless you’re able to pay off the balance in full to avoid accruing interest. If you do, however, find yourself in credit card debt, do the following:

• Speak to your credit card providers about consolidating debt.
• Consider setting a tight budget and getting an additional job on the side until the debt is significantly paid down.
• Don’t just pay the minimum balance due. Instead, pay down the card that has the smallest debt first and work your way up.
• Close each card account as debt is paid off. While this may impact your credit score negatively in the short term, having fewer open debts can increase your score in the long run. 

4. Build an emergency fund.

Having three to six months worth of expenses set aside in an emergency is ideal, but having even more can better secure your financial future in the event an emergency arises. Depending on your salary and monthly expenses, building an emergency fund can take a few months or a couple years.

When building your emergency funds, contribute as much money as you can each month. You may even consider opening a separate emergency funds savings account and having a portion of your paycheck go directly to that account every payday.

5. Increase your retirement savings contributions each year.

A helpful time to increase your contribution is when you get a raise or a bonus. Increasing your monthly contribution based on the percent or dollar amount your salary changed is a sound strategy to regularly increase your contribution. If you are on a tight budget and can only increase the contribution temporarily, doing so for a limited amount of time is better than not increasing it at all. 

6. Get help from a financial professional.

Once you have decided to save for retirement, you may have questions or run into unexpected problems. A trusted CPA firm can help answer any retirement questions you have as well as ensure you are maximizing your retirement savings potential.

For further assistance with retirement planning at any age, schedule a consultation with the top-rated accountants at Miller & Company.

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RMDs have gotten a lot of attention this year, as the Coronavirus Aid, Relief, and Economic Security (CARES) Act suspended required withdrawals from retirement accounts in 2020 to give those accounts more time to recover from post-COVID stock market downturns. However, next year, account holders who are 72 or older (or 70½, if you reached that age in 2019), must resume taking their annual RMDs.

Here’s a brief overview of RMDs and how they can impact your taxes.

How do RMDs work?

As mentioned above, an RMD refers to the minimum amount that’s required to be withdrawn from your retirement account each year. The Internal Revenue Service helps taxpayers calculate this amount using a set of worksheets to divide the account’s year-end fair market value by the account holder’s life expectancy. While you can withdraw more than the minimum required amount if you want or need to, you must pay income tax on the amount you withdraw. 

With the exception of account holders who turned 70 ½ in the year 2019, IRA owners must take their first RMD by or before April 1 following the year they turn 72, and continue to take subsequent withdrawals every year after that. Be sure to stay on top of your deadlines if you’re approaching or above this age. If you miss your withdrawal deadline, you can expect to pay the IRS a 50% penalty of the total amount of money they were supposed to withdraw. 

Keep in mind that Roth IRAs are not subject to RMDs, regardless of the account holder’s age, because taxes are already paid on the funds in these accounts. 

How to calculate your RMD

The IRS breaks down all the information you need to calculate your RMD in Publication 590-B. There are three different tables that the IRA offers for taxpayers, depending on their personal circumstances:

1. Joint and Last Survivor Table. This table is used if your spouse is the sole beneficiary of your IRA and/or if you are 10 years older than your spouse.
2. Uniform Lifetime Table. In order to use this table if you have more than one beneficiary and you are less than 10 years older than your spouse.
   
3. Single Life Expectancy Table. This table is used if you are a beneficiary of an account such as an inherited IRA.

If you have more than one qualifying individual retirement account, you will need to calculate each separately. While you may have similar balances in multiple accounts, your calculation can vary. Calculations factors in your age, account balance, and in some cases, your beneficiaries. 

Be sure to consult a financial professional after you go through the IRS worksheets to help you ensure your calculations are accurate. 

Get help from a trusted CPA.

Not sure how your RMD will impact your tax planning? The trusted team at Miller & Company can help you calculate your withdrawal amount and determine how to plan ahead for owed income taxes. Contact us to schedule your consultation.

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Understanding what you might owe and when, as well as keeping meticulous financial records, is the best way for self-employed professionals to stay on top of their tax obligations. To help keep your finances in check, here are some tax tips for freelancers and self-employed individuals to follow.

1. Understand which taxes you are responsible for paying.

Freelancers and self-employed professionals are responsible for paying self-employment and income taxes. The federal self-employment tax rate is 15.3% for the 2020 tax year. Each state has its own rules about income tax, so be sure to check with your accountant if you’re not sure what you might owe your home state.

2. Make your estimated quarterly payments.

After you’ve made a certain amount of money, you are required to pay estimated quarterly taxes . Estimated taxes can be tricky for people who are new in business and don’t have a history of projections, but if you don’t pay enough throughout the year, you may be subject to a penalty fee.

To help avoid incorrectly estimating your taxes, always let your accountant know when your revenue exceeds your estimates. Providing your accountant with your estimates as each quarter approaches its end can help you adjust your payments to more closely reflect your owed estimated taxes.

3. Keep track of your income and expenses.

Excellent bookkeeping that includes keeping track of your income can be essential during tax season. Your accountant will need to know how much money you made so they can advise you on your future tax payments accordingly.

4. Understand which credits and deductions you’re eligible for.

As a freelancer or self-employed professional, you’ll be able to deduct certain business expenses from your taxable income. Keep track of all your ongoing expenses and as often as possible, including keeping your receipts and credit card statements as forms of proof.

Depending on the type of business you run, the activities you’re involved in, and whether you have employees, you may also be eligible for certain tax credits at the end of the year. This is especially true for the 2020 tax year, as many businesses will be able to take advantage of certain provisions in the CARES Act. A financial professional can help you understand what you’re eligible for and what proof/records you’ll need to provide to take advantage of these credits and deductions.

5. Organize your records, receipts, and business paperwork.

Keep all your business paperwork organized in a safe place, as you’ll likely need it to file your taxes. As noted above, you will want to have copies of receipts and client invoices, as well as any tax forms that you provide to your employees and/or contractors.

6. Consult with a trusted tax professional.

When it comes to your taxes, hiring a qualified CPA firm like Miller and Company LLP can help save you time and money. While it’s helpful to know what taxes you’re responsible for paying among other things concerning your finances, you are busy running your business and staying on top of the latest tax laws can be time consuming.

Contact us today to schedule your consultation with one of our experienced tax professionals.

Read more tax tips for freelancers from Paul Miller, CPA, on Business Insider.

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The bigger your business gets, the more complicated your finances become. Large businesses have higher earnings, more vendors and clients, and in many cases, more employees with larger salaries and benefits packages compared to a small startup. They may also qualify for more tax credits and deductions as their business expense list grows.

The quality of your accounting and bookkeeping can make all the difference in your business’s bottom line, especially come tax season. That’s why it’s critical for any large business to invest in good financial professionals to stay on top of ever-changing regulations and help you manage your cash flow.

Here are a few key reasons why proper accounting for your large business is non-negotiable.

1. You’ll know where you can benefit from deductions.

A good business accountant will be able to find tax deductions for you that you may not have known about, or maximize the ones you did know about. Even small deductions can add up for big savings at the end of the year.

2. Good accounting can reduce your risk of an audit.

The thought of a tax audit by the Internal Revenue Service can cause even the most organized business owner a lot of stress. Audits can be expensive and overwhelming, but an accountant can help ensure your finances are on track to help you avoid an audit or, in the event you do get audited, help ensure a smooth process with the IRS.

3. It will help you maintain a realistic budget.

If you want to avoid overspending on your business, you’ll need to start with a realistic budget. An accountant can help you pare down your business expenses and set a budget that reflects your current and projected revenue.

4. You’ll remain compliant with changing tax laws.

Every U.S. business is required to follow certain federal and state regulations regarding their tax obligations. With insights from a trusted accountant, you’ll always be on top of your tax liabilities and understand what you owe.

5. It can make payroll easier.

A good accountant can help ease the burden of payroll. In addition to ensuring employees get paid on time and in the correct amounts, payroll assistance can include:

• Monitoring employee paid time off
• Managing payroll audits
• Ensuring payroll adheres to all local and state level laws such as overtime payments
• Resolving any payroll issues that may arise

6. You’ll be better able to manage and monitor cash flow.

Cash flow is an incredibly important part of any business’s financial health. The more efficient and accurate your accounting processes are, the better picture you will have of your company’s cash flow.

Formal cash flow statements include information on changes pertaining to all cash and cash flow equivalents of business. It also notates business cash flows through all financing, investing, and operating transactions. The accountant who helps you prepare these statements can help you interpret and analyze them to make better business decisions.

7. You can evaluate and improve business performance on an ongoing basis.

When you regularly evaluate business performance, you can understand how to improve it. A good accountant can provide insights on:

• Opportunities for your company to grow.
• Better business planning to help you meet your financial goals.
• Where to cut expenses and where to invest more.

Looking for a top-rated CPA firm to help with your large business accounting needs? Contact Miller & Company today to schedule your consultation.

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This means there’s a large group of Americans who are now receiving unemployment compensation for the first time. While the weekly benefits a financial relief to those struggling to find work, they may not be so relieved come next tax season when they find they owe income taxes to the IRS.

On August 18, 2020, the Internal Revenue Service issued a press release reminding those on unemployment that their benefits are, in fact, considered taxable income and must be reported on a federal tax return. This includes special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The good news is, you can opt to have taxes withheld from your unemployment compensation so there are no surprises when you file your 2020 taxes.

What types of unemployment payments are subject to withholdings?

The IRS recommends that taxpayers who receive the following unemployment compensation should calculate their estimated tax withholdings:

• State benefits paid from the Federal Unemployment Trust Fund
• Railroad unemployment compensation benefits
• Disability benefits paid in lieu of unemployment compensation
• Trade readjustment allowances under the Trade Act of 1974
• Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974
• Unemployment assistance under the Airline Deregulation Act of 1978 Program 

If you’re currently receiving any of these payments, you will receive IRS Form 1099-G from the agency paying your unemployment benefits in January 2021. This form will show the amount of unemployment compensation you received and any federal income tax withheld during 2020. Hold onto it, as you will need it when you file your 2020 federal tax return. 

Do I have to withhold taxes from my unemployment benefits? 

Withholding is completely voluntary. However, if you can afford to do so, it’s a good idea to take this option to avoid owing a large tax bill next April. 

According to federal law, recipients of unemployment compensation can elect to have a flat 10% withheld from their benefits to cover part or all of their tax liability by filling out IRS Form W-4V, (Voluntary Withholding Request).

What if I can’t afford to take the withholding? 

For many Americans, stretching unemployment benefits to cover their family’s needs can be a challenge, and a 10% withholding may create an additional financial strain. In other cases, that withholding may not be enough to meet your full tax obligation. 

If this is the case for you, you can make quarterly estimated tax payments instead, just like businesses and self-employed individuals. The IRS provides additional details on quarterly estimated taxes and calculation worksheets on Form 1040-ES and Publication 505. Once you calculate the total amount you will owe (based on your weekly unemployment compensation), you can divide that number by 4 and pay the quarterly amounts on September 15, 2020 (for Q3) and January 15, 2021 (for Q4). 

If you’ve been receiving unemployment benefits and haven’t had taxes withheld or paid quarterly estimated taxes for Q1 or Q2, consult with a trusted financial professional to determine your best options for meeting your tax obligations. 

What happens if I go back to work and stop receiving unemployment? 

If you begin earning regular wages or self-employment income and are able to go off unemployment benefits before the end of 2020, make sure you’re having enough taxes taken out of your pay by using the IRS’s tax withholding estimator. This online tool can help you avoid or lessen your year-end tax bill or adjust your income to receive more money up front with a smaller refund at tax time. 

Still have questions about unemployment and your tax bill? Contact Miller & Company. 

If you’re unsure of how your current unemployment obligations will impact your 2020 taxes, schedule a consultation with the experienced CPAs at Miller & Company LLP. We’ll help you understand what you might owe and assist you with setting up voluntary withholdings or making estimated tax payments.

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While this may be an ideal lifestyle choice for some, handling your taxes can become complicated when you reside in more than one state throughout the tax year. Here are a few tips for determining your residency type and filing your taxes accordingly.

Determine your residency type and required tax forms

There are three major residency types and you’ll need to determine which applies to you in order to know how to file your tax return:

1. Resident – Your residency is the location of where you live. You are a resident of a state if your intended main home resides in that state. For example, if you own a home in New York but stay in a vacation rental property in Connecticut for three months during the winter, you would only need to file taxes as a resident of New York State.
2. Part-year resident – You become a part-year resident when you own property in different states, and you live in each one for part of the year. If you own homes in New York and Connecticut, and every year you split your time between the two states, you need to file as a part-year resident in each state.
3. Non-resident – A non-resident is a person who makes income in a state but does not reside there. For example, many New Jersey residents commute to work in New York City. Because they make their income in New York but do not live there, they are considered non-residents. Similarly, if you live in New York and have a property in Connecticut that you rent to others (but do not occupy yourself), you would file a resident tax form for New York state and a non-resident tax form for Connecticut.

Many states have special forms to file non-resident taxes, though some use the same forms as full-year residents with certain provisions. Check your state’s tax website for more information on which forms you should be preparing.

Dividing your income

When you file part-year tax returns in multiple states, you’ll need to determine the total income you earned while living in each state.

If you work separate jobs in each state and receive a W-2 form from those in-state employers, it’s easy to separate your income and determine how much you’ve earned in each location. However, if you operate a business across state lines, own rental properties, or have another unique income situation, you’ll need to calculate how to allocate your income. There are two main methods for determining your income allocation:

• How long you lived in each state – If your income is the same every week or month, then you can allocate it based on the exact time you spent in each state.
• Payroll information – If your income fluctuates throughout the year, use your paystubs or invoices to determine how much you made during your time in each state.

If you have any unearned or passive income in a certain state, such as from stock sales or investments, you would attribute that income to the state you were living in when you received it.

Work with an experienced CPA

If you have property in multiple states and need help navigating the tax requirements for each, don’t try to handle it alone. Contact the experts at Miller & Company and schedule a consultation with the best rated accounting firm located in New York City, Washington, DC and Sarasota, FL to discuss your part-year resident tax questions and preparation needs.

Sources:

https://turbotax.intuit.com/tax-tips/state-taxes/multiple-states-where-to-file/L5NxnNH21

https://www.thebalance.com/how-to-file-a-part-year-resident-state-tax-return-3193260

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What is a certified minority-owned business?

According to the National Minority Supplier Development Council (NMSDC) — the largest and most prominent certification body for minority-owned businesses — you must meet the following criteria to qualify as a certified minority-owned business:

• You must be a U.S. citizen.
• Your business must be at least 51% minority-owned, operated, and controlled. For publicly-owned businesses, at least 51% of the stock must be owned by one or more minority group members. The NMSDC defines a minority group member as “an individual who is at least 25% Asian, Black, Hispanic or Native American.” Eligibility for minority-owned business certification is established through screenings, interviews, and site visits. 
• You must be a for-profit enterprise and located in the U.S. or its trust territories.
• Your business’s management and daily operations must be exercised by the minority ownership member(s).

The U.S. Small Business Administration, The Women’s Business Enterprise National Council, and other local and regional certification bodies have similar criteria for businesses that are at least 51% owned by women and/or individuals from other socially and economically disadvantaged groups.

Becoming certified as a minority-owned business can give you a leg up on private and government contracts. Many government agencies are mandated to reward a percentage of their contracts to minority-owned businesses, while private corporations may choose to work with a minority-owned business for tax incentives. 

There are also numerous resources you can access to help you grow your minority-owned business, including  business.usa.gov, your state’s Disadvantaged Business Enterprise (DBE) site, and the Government Services Administration (GSA) site.   

What tax incentives can you get as a minority-owned business?

The federal government provides tax incentives for companies that partner with minority-owned businesses to obtain materials and supplies. Additionally, another tax incentive helps reduce tax liabilities for companies using minorities who offer labor or services to federally- or state-funded projects.   

Similarly, the U.S. Department of Commerce’s Minority Business Development Agency (MBDA) qualifies minority-owned businesses for special employment consideration and allows those businesses to apply for special tax incentives whenever available under contract. 

Tax tips for minority business owners

1. Take advantage of the new-markets tax credit (NMTC).

Investors can claim the NMTC for investing indirectly in minority-owned businesses. This program provides a tax credit against a taxpayer’s federal income taxes for investing in designated community development entities (CDEs). 

2. Choose your business location wisely.

Business owners who hire employees who live near or on Native American reservations are eligible for this tax credit. You may also be able to claim a tax credit if you start a business in an economically distressed or low-income area. While these tax breaks are not exclusive to minority-owned businesses, entrepreneurs who have lived in or are familiar with these locations may have an advantage when it comes to gaining traction as a business.

3. Get help from a trusted CPA firm.

The tax accounting experts at Miller & Company LLP can guide you through the tax filing process and help determine the best tax strategy for your business. We’ll assist you with the certification process and ensure you find and claim all applicable tax breaks and incentives for this tax year and beyond. Contact the experts at Miller & Company to schedule a consultation with an accountant and discuss your tax questions and preparation needs. Miller & Company is among the top-rated tax advisory firms located in New York City, Washington, DC, and Sarasota, FL.

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Sources:

https://www.americanexpress.com/en-us/business/trends-and-insights/articles/5-tax-tips-for-minority-owned-businesses/
https://www.uschamber.com/co/run/business-financing/certification-guide-for-minority-owned-business
https://www.kabbage.com/resource-center/manage/benefits-of-being-a-minority-owned-business 
https://smallbusiness.chron.com/tax-incentives-using-minorityowned-business-30659.html

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Cost segregation for tax purposes is a forte of the construction accountants at Miller & Company, LLP.

Providing you with the sometimes-elusive cost segregation tax benefits is a service that comes naturally when you rely on the expertise of the best accountants in New York City, Washington DC and Sarasota, FL.

Knowing Your Business

As your top Sarasota certified public accountant (CPA) gets to know your company’s specific operations — as well as the details of each project in which you’re involved — a cost segregation study is one of the most practical steps to ensure you take advantage of the most aggressive tax deductions possible.

A cost segregation study for tax purposes includes:

• Separating the personal pieces of the property from the structural components
• Identifying each personal property’s value
• Classifying and analyzing the personal properties that are deductible on your federal returns
• Relying on the Internal Revenue Service (IRS) process for calculating the depreciation value of the property

To accurately assess which personal property items are eligible for accelerated tax deductions, your commercial real estate accountant follows a set of complex rules.

Factors affecting the classification of personal property depend on a number of variables, including:

• How difficult the personal property is to move or remove from the structure
• How the items are attached to the structure
• If the property is intended to remain fixed
• What its life expectancy is determined to be

It’s All in the Details

Cost segregation is by no means a deceptive or risky endeavor. In fact, the practice has been successfully employed and supported by court rulings since the early 1960s. And in 1997, the United States tax court made it official, ruling that cost segregation for tax purposes is allowed.

Knowing which items meet the criteria for personal property allocations is another key factor that only an experienced commercial property tax CPA in Sarasota fully understands and can verify. A complete analysis of the building by a valuation expert is required to determine which benefits are allowable.

Some personal property examples that your accountant looks for while performing the cost segregation study include:

• Various wiring, such as that used for security systems or other systems with a shorter life span
• Specific HVAC lines and vents that often are considered a part of the building’s structure
• Signage and decorative lights
• Wall partitions that are moveable
• Shelves and cabinets
• Decorative millwork
• Landscaping and fences
• Isolated parking lots
• Sidewalks
• Fire protection
• Alarm systems

Even More Aggressive Tax Deductions

Residential apartments typically depreciate over 27.5 years, while other commercial buildings follow a 39-year depreciation schedule. A cost segregation study for tax purposes allocates personal property assets over a shorter span, varying from five to 15 years. By reclassifying the property, you then defer taxes significantly and increase your cash flow. The accelerated tax deductions are taken in earlier years, reducing your tax liability in those specific years.

Commercial real estate investors and owners optimize these cost segregation tax benefits quicker than ever, sometimes even immediately with the passage of the Tax Cuts and Jobs Act of 2017, which allows individual commercial real estate professionals and businesses to deduct a percentage of the costs of some personal property assets the very first year they go into service.

And for the first time, even used property is eligible for the tax bonus. The latest commercial real estate tax law also increased the percentage of the bonus treatment to 100 percent through 2022 that previously was only 50 percent in 2019.

Additional Cost Segregation Tax Benefits

Your cost aggregation study, performed by a construction accounting team that understands the complexity of the process, becomes more urgent and impactful than ever.

In fact, your CPA may turn up even more tax benefits you may not have known about, such as those covered by the 2015 Protecting Americans from Tax Hikes, commonly referred to as the PATH Act.

The PATH Act affected the results of a cost segregation study in regards to renovations. A new group of assets deemed “qualified improvement property” was created to replace retail, restaurant and leased improvement properties that follow a 15-year depreciation schedule.

And it also included improving assets that aren’t structural — such as alarms, ventilation and plumbing systems. But to follow the letter of the tax laws, your tax accountant must remain abreast of the technicalities inherent in these laws.

Strategic Planning Required

By bringing your tax accountant into the planning stages of your project, you can prepare for these aggressive tax deductions and set your deadlines accordingly. As an integral part of your team, your CPA automatically conducts a cost segregation study as a part and parcel of your overall strategic financial planning.

The qualified commercial real estate accountants at Miller & Company, LLP are proficient in these specific accounting duties. But they’re experienced and knowledgeable in all your accounting needs — from payroll and business valuation to cash flow management, and succession planning. They provide a multilingual team of experts to assist you every financial step of the way. Contact the firm today to ensure you receive all the accelerated tax deductions for which you’re entitled.