• PREPAY EXPENSES more than ever before.
• Don’t forget ADA EXTRA expensing and tax credits.
• PAY YOUR KIDS!

PREPAY EXPENSES!

For your personal tax planning: Prepay estimated state tax payments and property tax UNLESS you are subject to alternative minimum tax (AMT). AMT might trigger if you have Incentive Stock Options (ISO), high capital gains or live in a high state income tax state.

For your business: The IRS has been back and forth on the issue of prepaying certain expenses. We’ve now seen that rent and other prepaid expenses are being allowed by Tax Court cases for periods paid within one year.

Here’s how it works: In December 2003, you pay the rent for your office space through November 2004. The twelve months of rent expense will be fully deductible in 2003. You might even be able to negotiate a rent reduction by pre-paying. Interestingly enough, the IRS did not update their publication. So, their current instructions do not agree with the Tax Court case and Revenue Ruling. (Yet another reason why you want to stay current on tax loopholes by registering at LOOPHOLES UPDATE.)

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ADA EXTRA

The ADA (Americans with Disability Act) rehab expenses for your commercial expenses can give you some special deductions.

First of all, you can get an extra “expensing” allowance. That means that you can take a deduction for ADA expenditures of up to $15,000. This is in addition to other expensing and bonus depreciation that you can receive.

PLUS, you might be able to qualify for the ADA Tax Credit of 50% of the expense. Remember that tax credits directly reduce the tax you pay. ADA expenses can include special equipment that you put in place for your customers or employees with special needs or it could include renovations to make your property more accessible.

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PAY YOUR KIDS!

Now is the time to be looking at all the extra deductions you can get through your business before year-end. The magic number for 2003 is $4,750. If you can legitimately employ your child in your business, you’ll get a deduction and if they have no other income, they won’t pay tax.

Here are the three Tax Loophole rules on employing your child:

(1) Have a written job description. This actually applies for every employee you have, but it is especially true for your kids.

(2) Get a record of hours worked. Require your child to track their time they spend working in the business.

(3) Pay a reasonable wage for the work done. Don’t pay your child $100 an hour to empty the wastebaskets! Instead, pay the reasonable, going rate for work that they perform.

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