Jan/Feb Donations to Haiti relief deductible in 2009

A new law was recently enacted allowing donors who give to Haiti relief efforts between January 11, 2010 and March 1, 2010 to deduct these donations on their 2009 tax returns rather than wait to deduct them on their 2010 returns.

Read the IRS news release for details.

Is it a repair or a depreciable asset?

When you pay a contractor to paint one of your rental properties, can you deduct the entire amount as a repair or maintenance expense? In most cases, yes, you can. What about the cost of paving a driveway or parking lot at your company's manufacturing facility? That's a little trickier, but, in some cases, you might be able to deduct the entire cost in the year you incur it rather than capitalizing the expense and taking depreciation deductions slowly over several years.

This article from accountingweb.com discusses some of the nuances and opportunities of this kind of thinking, including the opportunity to file certain paperwork to catch up on any unclaimed deductions from prior years.

If you've ever considered the tax advantages of a real estate cost segregation study, then this discussion about repairs vs. assets may sound familiar. Both are exercises in classifying costs in the proper manner based on the rules and regulations set by Congress and the IRS. Cost segregation studies pick up where the repair vs. asset debate leaves off. Once the proper current expenses are pulled out, then cost segregation studies ensure that all remaining costs classified as assets are being depreciated over the correct number of years (i.e. the least number of years allowable).

Our firm, through our association with the BDO Seidman Alliance, provides high-quality, engineering based cost segregation studies for owners of commercial, industrial and residential real estate. I've personally been involved in many studies and all of them have produced excellent results for the property owners. By combining a thorough assessment of all repair and maintenance costs with an engineering based cost segregation study, you can rest assured that you are taking the maximum amount of deductions allowed for the costs associated with your business or rental property.

Please contact me at 803-753-5244 if you are interested in discussing your tax situation.

Should you convert from a Traditional to Roth IRA?

There are many factors to consider when answering that question, but a couple of the restrictions that kept many individuals from making the conversion in the past have been eliminated.

Prior to 2010, converting a traditional IRA to a Roth IRA was allowed only if your gross income was less than $100,000 and your filing status was not married filing separate. That changes this year, though. The Tax Increase Prevention & Reconciliation Act of 2005 eliminated the restrictions on income and filing status beginning this year.

That same act allows a special incentive for conversions that occur during 2010--you may elect to recognize the income (and pay the related tax) in equal portions in 2011 and 2012. This delayed recognition will not only give you some extra time to pay the tax due on the conversion, but will also allow you some additional time to be certain that a conversion is right for you. This extra time for assessment is important because if you find after the fact that the conversion is not your best option (because of a drop in account value or any other reason), then you can reverse the conversion up to 6 months after the regular due date of the tax return for the year of conversion.

Please see this article from the January 2010 Journal of Accountancy for a nice rundown of the details and some advice on what factors your should consider in making your decision.