There are other, less dramatic ways that we can save taxes by paying more now. When putting new depreciable assets into use we often have a choice about using one of the rapid depreciation methods or using a slower depreciation method. Before making that choice we need to look at the long range picture. If the year the new asset goes into use happens to be a low income year, it could be better to not use a rapid depreciation method so that more depreciation will be saved for years when the income is expected to be higher. There are many times when taking a bigger depreciation deduction causes the income to be so low that a person’s itemized deductions are not as effective that year, and since itemized deductions cannot be carried over to the next year, the effect of the added depreciation is lost.
Sometimes a decision has to be made as to whether an expenditure is currently deductible or should be capitalized and depreciated over time. Theoretically, an expenditure either is or is not currently deductible. However, as a practical matter, there are lots of times when the facts can be viewed different ways and a decision made as to which way to handle the tax treatment. In these cases it is important to look at the long term and see when the deduction would be most beneficial.
These are just a few of the kinds of tax choices that you can make. There are many times that we can make decisions that affect long range tax issues and it is important that we communicate with you face-to-face so that the best decisions can be made. The better we know you and your plans and expectations, the better those choices will be.