Depreciate, defer & deduct: end of year tax planning.

• Author: Storm, Joette
• Position: FINANCIAL SERVICES

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Depreciate, defer and deduct--if l you are a professional or business owner thinking about taxes and what you can do in the last two months of the year, those are terms to keep in mind. Current tax law provides some pro-taxpayer options for chiseling away at taxable income. It's not a bad idea to make an appointment with an accountant or tax preparer now to scope out ways to reduce your tax bill.

Local CPA John A. Letourneau, president of Thomas, Head and Griesen, PC, has been providing tax planning since the early 1980s, primarily to individuals with annual incomes upwards of $250,000. He also offers planning for estates and trusts. Before meeting with clients, he advises them to "assemble information about their 2012 economic position and what they anticipate for the end of the year," and to include the 2011 tax return for comparison.

He asks clients about any economic decisions they are considering, what their goals are, and how they view Congressional actions that will occur in 2013.

This year, with all of the weather disasters, any economic loss because of power outages or wind damage should be included in the overall calculation of taxable income.

However, if a business owner receives insurance payments under a business interruption policy, the payments must be reported as revenue.

"Alternatively, if the policy provides for payments based on loss of use, there may be an argument for deferral of the insurance proceeds," Letourneau says. It depends upon the individual circumstances, of course.

To the extent that a business incurs an economic loss because of the damage or destruction of property, that loss is calculated as the lesser of two amounts: the difference in the fair market value of the property before and after the damage, and the tax basis in the property. If the item damaged has previously been depreciated, it cannot be considered as a loss.

Continuous Change

Tax law is continually changing: Some provisions will expire this year, while others only start to take effect in 2013. Depreciation under Code Section 179 offers some attractive opportunities for expensing business property.

Kevin Van Nortwick leads the tax department at Mikunda, Cottrell and Co. Inc. He counsels hundreds of corporate and business clients. Right now one of the provisions he focuses on for those clients has to do with expensing new or used equipment purchased this year. Tax Code Section 179 allows a business to expense new or used...