55 Tax Breaks Have Expired

The trend for taxation is up.
This is no time for a sloppy approach to taxation.

As far as I know, no expiring tax break has been extended.  But the AMT fix was made permanent last year.

Among the tax breaks not extended …

Section 179 and bonus first year depreciation

This means you will have to depreciate your computers and other equipment over five to seven years instead of taking it all into expense when you buy it.  If you are used to taking substantial chunks of section 179 or bonus depreciation … you will feel the bite. BECAUSE, not only will you not write off your new acquisition in the initial year, you will only get HALF the first year’s depreciation. BECAUSE that’s the way MACRS depreciation works. HOWEVER, this is just a timing difference, you do not lose the deduction for all time. You just can’t take the deduction as fast as you used to. Which means more tax now; less tax in the future.

That will be a big speed bump for many businesses. One of the problems with timing differences is this … they’re addicting.

Corporate Research & Development Credits

This will have no immediate effect on any clients, but it is notable because this is the primary reason no big corporation in the country pays tax at the highest rates despite the fact they earn millions or even billions of dollars.

Tax Relief for Underwater Homeowners

Income forgiveness becomes taxable for people who short-sell their homes for less than the mortgage amount. However, there are still ways to get out of taxation here, so there’s still hope for you.

Other stuff includes many of the green credits, windpower, teaching supplies, commuting expense, and several  industry specific tax breaks.

In one way or another this will hit most business taxpayers, some of them it will hit in a big way

Article here … if you’re bored … not a good article, but the best I could find …

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/02/from-nascar-to-wind-power-congress-just-let-55-tax-breaks-expire/

But remember these truisms

The number one tax shelter known to man is a wholly owned business. Always has been. Always will be until they change the constitution, either by legislative action or neglect.

Never do anything just because of taxes. At the best it will cost you 100% to save 45%.

Revenue solves all problems. Profits are king. Cash flow is king. Working for a small, steady business is Crown Prince.

The point of tax strategy is to increase the equilibrium point between revenue, costs and income tax to where the maximum amount of money sticks to the wall. Sometimes this is achieved by paying more taxes.

The way to pay the most taxes possible is with a partnership, an LLC, a  C corp or as a schedule C business or any of the other of the multitude of business entities available, except S corps. The way to pay the least tax is to mix and match all entities to take advantage of every tax preference in sight.

Always hold real estate in an LLC. Always do business as an S corp. Never hold real estate in a  corporation. Never do business in an LLC.

If you have big hands, tattoo these truisms on the back of your hands.

Robert Ellis
www.elliscpafirm.com
The edge to survive in a perilous world

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