Veterinary 2010 tax tips
There are many advantages to owning your own business, not the least is certain tax advantages not available to non-business owners. (ie. W-2 Associates). In fact owning a business allows you to use the tax system in ways non-business owners can’t. Here is two examples.
1. Buy A New Car
You or your corporation can claim up to $8,000 in bonus depreciation on a new (not used) car purchased and placed in service before midnight on December 31, 2010.
You add the $8,000 to the $3,060 luxury limit for a 2010 limit of $11,060. To get to this limit, you can use a combination of Section 179 expensing and depreciation. You reduce the $11,060 limit by personal use.
Example. If business use is 80 percent, then your limit is $8,848 (80 percent times $11,060). The dealer’s demonstrator vehicle qualifies as a “new” car eligible for bonus depreciation.
How does this help? It can offset the same amount of income, reducing tax on that amount to zero. Something that can’t be done with a non-business use vehicle.
Can’t I just deduct expenses as an associate driving back and forth to work? Generally no. Certain employer required driving trips can qualify but your daily drive to work and home does not.
Convert A Personal Vehicle to Business Use
Do you have a personal vehicle that you purchased new? If so, consider converting that vehicle to business use before December 31, 2010, to qualify it for 50 percent bonus depreciation, which is unlimited on the SUVS and crossover vehicles with a GVWR of more than 6,000 pounds; limited to $11,060 on cars with curb weights of 6,000 pounds or less; and limited to $11,160 on SUVS, crossover vehicles, and pickup trucks that do not have a GVWR of greater than 6,000 pounds.
Example. Dr. Smith purchased a new car in 2009 while he worked as an employee. He used the car for commuting to and from his job. He never used the car for business until he bought a practice in August 2010.
Because Dr. Smith purchased the car new, he may use bonus depreciation in calculating his self-employed car deductions for 2010. Thus, Dr. Smith’s 2010 luxury limit is $11,060 on his 2009 purchased car. He could realize $3000 or more in taxes savings for 2010 depending upon his tax bracket and other deductions.
For more tips see www.bradfordtaxinstutue.com