property - Linkenheimer LLP CPAs & Advisors

Disabled Veterans in California Get a Tax Break

Disabled veterans in California get a tax break. The California State Board of Equalization has announced increases in the property exemption amounts and the household income limit for disabled veterans’ exemptions for 2020. For the 2020 assessment year, the exemption amounts are $143,273 for the basic exemption (up from $139,437 for 2019) and $214,910 for the low-income exemption (up from $209,156 for 2019). The household income limit for those claiming the low-income exemption is $64,337 (up from $62,6147 for 2019). Contact your Linkenheimer CPA with questions.

By Linkenheimer LLP|2020-09-03T20:03:55+00:00June 3rd, 2019|tax planning, taxpayer|0 Comments

Does Prepaying Property Taxes Make Sense Anymore?

Prepaying property taxes related to the current year but due the following year has long been one of the most popular and effective year-end tax-planning strategies. But does it still make sense in 2018?

The answer, for some people, is yes — accelerating this expense will increase their itemized deductions, reducing their tax bills. But for many, particularly those in high-tax states, changes made by the Tax Cuts and Jobs Act (TCJA) eliminate the benefits.

What’s changed?

The TCJA made two changes that affect the viability of this strategy. First, it nearly doubled the standard deduction to $24,000 for married couples filing jointly, $18,000 for heads of household, and $12,000 for singles and married couples filing separately, so fewer taxpayers will itemize. Second, it placed a $10,000 cap on state and local tax (SALT) deductions, including property taxes plus income or sales taxes.

For property tax prepayment to make sense, two things must happen:

You must itemize (that is, your itemized deductions must exceed the standard deduction), and
Your other SALT expenses for the year must be less than $10,000.

If you don’t itemize, or you’ve already used up your $10,000 limit (on income or sales taxes or on previous property […]

By Linkenheimer LLP|2020-09-03T20:04:24+00:00December 7th, 2018|New Tax Laws, property tax|0 Comments

Could a Cost Segregation Study Help You Accelerate Depreciation Deductions?

Businesses that acquire, construct or substantially improve a building — or did so in previous years — should consider a cost segregation study. It may allow you to accelerate depreciation deductions, thus reducing taxes and boosting cash flow. And the potential benefits are now even greater due to enhancements to certain depreciation-related breaks under the Tax Cuts and Jobs Act (TCJA).

Real property vs. tangible personal property

IRS rules generally allow you to depreciate commercial buildings over 39 years (27½ years for residential properties). Most times, you’ll depreciate a building’s structural components — such as walls, windows, HVAC systems, elevators, plumbing and wiring — along with the building. Personal property — such as equipment, machinery, furniture and fixtures — is eligible for accelerated depreciation, usually over five or seven years. And land improvements — fences, outdoor lighting and parking lots, for example — are depreciable over 15 years.

Too often, businesses allocate all or most of a building’s acquisition or construction costs to […]

By Linkenheimer LLP|2020-09-03T20:04:28+00:00October 3rd, 2018|cost segregation, deductions, depreciation, New Tax Laws|0 Comments

6 Key Factors to Consider When Evaluating a Property for Cost Segregation

As the real estate market continues to rise, property owners are seeing the need to become more educated on ways to reduce their costs. Knowing that real estate is one of the only investments in the United States that can be depreciated (cost recovery), it comes as a no-brainer that property investors are utilizing the benefits of the tax code via cost segregation in order to maximize their cost recovery!

The IRS allows the separation of building components so that items such as land improvements and personal property can be separately depreciated over the shorter recover periods. A property’s structure is generally subject to a 39-year recovery period (non-residential) and 27.5-year for residential, while land improvements qualify for a 15-year recovery period and personal property qualifies for a 5-year recovery period. As a property investor, let’s say you installed new flooring throughout your building. Every year, you can write that flooring off on your taxes until the end of its useful life. That period of time that the asset depreciates is considered the recovery period and the shorter the recovery period, the greater the reduction […]

By Linkenheimer LLP|2020-09-03T20:04:59+00:00February 3rd, 2017|cost segregation|0 Comments

Real Estate Agent Not Permitted to Deduct Rental Losses

For our clients out there who are real estate agents and property owners: The taxpayer was a licensed real estate agent who owned rental properties. For 2006 and 2007, she deducted a total of $78,543 in rental losses. Upon audit, the IRS disallowed these losses because the taxpayer failed to show she materially participated in the rental activity. The taxpayer argued that her status as a real estate professional automatically rendered the losses nonpassive, regardless of material participation. The Court of Appeals for the Ninth Circuit sided with the IRS, holding that although real estate professionals are not subject to the per se rule under IRC Sec. 469(c)(2) that rental losses are passive, they must still show material participation before deducting rental losses. Therefore, the taxpayer was not entitled to deduct the losses.

If you have any questions, please contact your Linkenheimer CPA.

By Linkenheimer LLP|2020-09-03T20:05:09+00:00August 19th, 2016|deduction, irs|0 Comments