Tax Savings Strategies | TaxConnections

29 Feb 2024

A Powerful Tool For Rental Property Owners To Maximize Tax Savings Through Cost Segregation Studies

Rental Property Owners Maximize Tax Savings Through Cost Segregation Studies

Cost Segregation For Short Term Rental Owners

As a short-term rental property owner, maximizing your tax savings is essential for the success of your investment. One effective strategy to achieve this is through cost segregation.

Cost segregation is a tax-saving technique that allows you to accelerate the depreciation of certain assets in your property. Traditionally, real estate is depreciated over 27.5 or 39 years, while personal property is depreciated over 5 to 7 years and land improvements receiving a 15-year treatment. Cost segregation allows you to reclassify certain components of your property, such as appliances, fixtures, and special use electrical & plumbing as personal property, enabling you to depreciate them over a shorter timeframe. This results in larger tax deductions in the early years of ownership, reducing your taxable income and ultimately lowering your tax burden.

The beauty of cost segregation is its versatility, it can unlock tax savings for a diverse range of short-term rental properties, including:

Urban Apartments

Studio apartments, lofts, and trendy condos catering to business travelers or weekend getaways can benefit from cost segregation on appliances, furniture, smart home systems, and even rooftop amenities like grills and hot tubs.

Shared Accommodations

Hostels, co-living spaces, and even shared vacation homes can leverage cost segregation for common areas like kitchens, bathrooms, laundry facilities, and entertainment zones.

Written by TaxConnections Admin | Posted in Tax Savings Strategies • TaxConnections

04 Jan 2024

Can LIFO Still Provide Tax Savings In 2023?

While inflation is not at the high levels seen in the last couple of years, if you haven’t elected LIFO previously, now is the time to look at Last-In-First-Out (LIFO) accounting. If you have inventories of machinery and equipment, glass products or any concrete or cement inventory, there could be tax savings available for 2023. Whether you are already on LIFO or not, analyzing the IPIC LIFO method could be a great opportunity. IPIC LIFO uses indexes published by the Bureau of Labor Statistics to measure inflation on your inventory. In 2023 these indexes show inflation is still on the rise in many industries, which means businesses of all sizes could experience tax savings using LIFO.

Whether you are a manufacturer, distributor, or retailer, you have the opportunity to mitigate the negative impact of price increases and annually save money by using the LIFO inventory method. Adopting LIFO removes the phantom profits caused by inflation, lowering your tax liability and creating cash for reinvestment in your business. Any business with over $2M in inventory that is experiencing inflation is a qualified candidate for electing LIFO. Depending on the inflation rate and the inventory level, the cash savings can be quite substantial.

Written by Sara Richardson | Posted in LIFO • Tax Savings • Tax Savings Strategies

16 Jan 2020

9 Top Tax-Saving Strategies For Your Business

As a business owner, you know first-hand that taxes can take a big chunk out of your pocket. No matter how small your business is or how large you grow, you’ll always be on the hook for some kind of taxes. However, the tax code is such that there is always room for strategic tax savings as long as you operate within the laws. Your CPA is the best source of tax-saving strategies, but it can help if you present some of your own ideas, too. Here are some that are worth considering.

1. Consider Hiring Independent Contractors Instead of Employees

Payroll taxes are something every business owner needs to consider before making a commitment to add another employee to the payroll. Payroll taxes are one of the larger taxes that business have to pay, and they come around not once, but usually at least twice a month. One way that businesses have gotten around paying payroll tax is buy hiring independent contractors instead of employees. You don’t have to pay payroll tax on independent contractors that you hire. Of course, there are certain rules about what constitutes an IC and what constitutes an employee, but once you ensure you would be in compliance, you may be able to get by with ICs.

Written by Kazim Qasim | Posted in Tax Savings Strategies