Businessmen have a number of possible deductions they may be able to take advantage of as they explore their year-end tax options.
And with two major tax acts passed in 2006 and the remnants of one passed in 2005 to deal with, planning gets even more important.
Some things to consider before Dec. 31:
? The Section 179 depreciation expense deduction increases to $108,000 on qualified equipment placed in service before Dec. 31. Limits on use apply, particularly in partnerships, so make some calculations of benefit before the purchase.
? If your organization operates as an S corporation and at a loss for 2006, make sure the members have enough tax basis to take the loss; otherwise, the loss will not be available for 2006 and will be suspended until tax basis is created.
? Builders have the opportunity to get a credit for energy-efficient homes built after Aug. 8, 2005, and sold in 2006 or 2007. Maximum credit is $2,000 per house.
? Commercial real estate energy-saving improvements deduction is allowed under new Section 179D. The deduction is limited to $1.80 per square foot and there are other limitations and tests, but it provides an opportunity to get depreciation and a 179D deduction on same property
? Caution – There are a number of deductions or credits that were allowed in prior years that have not been extended to 2006, including the former depreciation benefits for items purchased and used in Former Indian Territory and credits for employment of Qualified Indian Roll Employees. The tax legislation packages that would extend these benefits have not been passed. Watch for any legislative changes prior to year-end after the election, but don’t plan on these benefits being available for 2006.
? Increase current deductions: Buy supplies before year-end and if you know you will be paying maintenance, repairs, advertising or similar items shortly after year-end, make the payment in 2006 to get the deduction a year earlier.
Tax tips provided by Mickey Shackleford, Tulsa tax partner with Eide Bailly LLP. ?