Small Business Tax Strategies

Q: I’ve been a hands-on owner in a machine shop for the past 30 years. Because of the noise in the shop, I had to buy a hearing aid that cost me about $5,500. Can I deduct that as a business expense? R.M.A., Grand Rapids, Mich.

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Q: We just got married and are looking to buy a house. If we buy at the end of the year, we may not have enough expenses to itemize our deductions for 2005. Can we still deduct any points we might have to pay on a mortgage? J.V., Leesburg, Va.

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Q: I bought stock years ago in a company that recently merged into another company. The shares I received back are worth less than my original cost. Can I deduct that as a capital loss? J.S., Park City, Utah

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If you plan to use an increasingly popular estate-planning tool—a charitable remainder trust (CRT)—be aware that you’ll need to jump through some new hoops to preserve the trust’s tax benefits.

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So-called "donor-advised" funds have become immensely popular with wealthy charitable donors. But that tax strategy is now under the gun. The IRS is trying to ferret out which funds benefit donors themselves rather than fulfilling charitable intentions.

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Conservation easements, in which landowners can earn tax deductions for preserving their open land, are rife with abuse, the IRS says. That’s why the IRS is cracking down on these tax goodies for wealthy landowners. The IRS has already fingered 240 taxpayers for audits relating to this tactic, with another potential 100 donors on the hit list.

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The tax law gives you plenty of leeway to deduct contributions within generous limits. In fact, if you’re like most donors, you probably aren’t even aware that any limits exist.

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We can’t overemphasize the need to keep the required records for charitable donations, especially because the IRS is turning up the heat on donation deductions.

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If you donate intellectual property (such as patents) to charity, you can claim a tax deduction for your generosity. But the 2004 tax law restricts what you can deduct.

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Are you ready for a computer upgrade? If the answer is "yes," don’t just toss out your old equipment.

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