Small Business Tax Deduction Strategies

The federal government wants to give retirement plan participants more incentive to invest in annuities. In a new package of proposed regulations and rulings, the IRS and Treasury are reducing the administrative burdens for partial annuities by simplifying the benefit calculation.

The IRS is targeting “first-time homebuyer credits” erroneously claimed by taxpayers. To qualify for the version of the credit in question in the following case, you must have stopped using an old home as your principal residence for at least three years before buying the new home:

The IRS has launched a new online tool, Exempt Organizations (EO) Select Check, which makes it easier for charitable donors to research tax-exempt organizations.

A small business can often recover the entire cost of qualified business assets in just one year, thanks to the generous Section 179 deduction. But there a few key wrinkles to the rules:

Maybe you own a vacation home as a getaway for the family during summers and long weekends. But now that the kids are grown, you’re not using the place much anymore. Strategy: Rent out the home this summer. Although it can be a hassle, the tax benefits generally outweigh the inconvenience.

Are you planning to sell or donate a boat or car to charity? Don't be too hasty. Arrange a “bargain sale” to a qualified charitable organization. By combining a sale and donation, you get cash back from the charity, plus a write-off based on the property’s fair market value.

Typically, you can protect your family by securing adequate life insurance coverage. But how much will they receive after Uncle Sam siphons off a portion for the federal estate tax? As long as you haven’t retained any “incidents of ownership” in the policy, the proceeds won’t be included in your taxable estate.

In these trying economic times, young adults may find it difficult to save for retirement. A little-noticed tax break can provide a big boost to lower wage-earners.

Q. I collaterized a loan for someone else in a securities account that was called. Can I deduct the interest?

Most taxpayers say they would never cheat on their taxes and that it’s wrong to do so. How­­ever, to 8% of taxpayers polled, it’s OK to cheat “as much as possible.”