| 14 Deductions You Might Miss |
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Page 1 of 2  The best accountant in the world can miss writeoffs you don't tell her about. Here are 14 that often get overlookedYes, you have a terrific accountant you've worked with for years. She makes sure you take all the deductions you're entitled to. But she's not a mind reader. If you fail to mention an item, she may miss it, too. Think of it this way: Can you accurately diagnose a patient if he doesn't tell you all his symptoms? To jog your memory, here are some deductions that doctors frequently overlook. Practice equipment Did you purchase
equipment for your practice last year, like office furniture,
computers, or off-the-shelf software? Provided you started using the
equipment in 2005, it qualifies for special treatment. So don't forget
to turn over the receipts to your accountant. Section
179 of the Internal Revenue Code provides a first-year expensing
election, which allows you to immediately deduct $105,000 of new or
used equipment, rather than depreciate it over several years. Even
better: "The practice equipment doesn't have to be paid for to get the
deduction," points out Janis Neri, a CPA with Filomeno & Company in
West Hartford, CT. "It just needs to be placed in service before Dec.
31. You can actually owe the entire balance on the equipment and still
deduct the full cost in 2005." However, if
your business use is less than 100 percent, but more than 50 percent,
the expense deduction is limited to the business portion of the cost.
(So, for example, if you made a purchase of $11,000 and only used it
for business 80 percent of the time, your first-year deduction would be
limited to $8,800.) If your business use is 50 percent or less, you
won't be able to use the first-year expensing election at all. SUVs Did
you buy a heavy SUV (defined as weighing more than 6,000 pounds) for
your practice in 2005? It's still possible to get a partial deduction
on it. You can expense as much as $25,000 of the cost, and you're
allowed regular depreciation, as well. For instance, if you paid
$65,000 for your SUV, you'd deduct $25,000 immediately and you'd get a
regular depreciation deduction of 20 percent of the remaining $40,000
(or $8,000). So your total first-year writeoff is $33,000. You'd
recover the remaining $32,000 in 2006 and subsequent years under the
general depreciation rules. But
Neri cautions, "The deduction is limited by business use. The only way
a physician can get the full writeoff is if the car was never used for
personal use. Few doctors qualify, considering that commuting to and
from home is personal use." Remodeling an office you rent If
you rent your office and remodeled it in 2005, you can take advantage
of a special 15-year depreciation schedule. (Normally, these
improvements must be depreciated over 39 years.) Remember, these
"leasehold improvements" must be interior improvements, and the
improvement must be made more than three years after the building was
first placed in service. Improving an office you own If
you own your office building (or if you have a medical condominium),
you also might be able to get a tax break for remodeling. "Many
tax preparers mistakenly lump together all expenses incurred in the
remodeling, expansion, or construction of an office building," notes
Richard A. Blum, a CPA and attorney with Elliot & Warren in
Charlotte, NC. "They then use straight-line depreciation over 39 years
for the entire construction expense." But some of those costs could
qualify for faster depreciation if the work is considered
"nonstructural" improvements. Blum provides the following examples:
Blum
warns, however, that the IRS requires proof that costs qualify for
faster depreciation. Talk to your accountant about obtaining a "cost
segregation study" which involves the allocation of the total value of
the property into the appropriate classes in order to compute
depreciation deductions. |
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