Getting Ready for Tax Time - by Becky Sanders

April 15 is around the corner (which, coincidentally, is my birthday! I'll be 29 again - heehee!) and it's time to get your paperwork in order. Whether you've made money in 1991 or not, you should be taking advantage of the tax deductions available to you for owning a business - whether it's a sole proprietorship, corporation or LLC.

I absolutely believe that you should use a tax accountant to prepare your return with no exceptions. If you skimp on paying for this service, you will probably lose tenfold what they would save you in deductions. So, by all means, find yourself a good tax accountant that has experience with real estate and business matters (and the mass preparer-type companies like H&R Block are not a good choice).

However, if you haven't kept good records throughout the year, it's time to get it in order because your accountant will need something to work with. I'm going to try to touch here on some areas of deductions you can write off for your business. This is not all inclusive, but it should remind you or enlighten you on some of the things you should be providing to your accountant.

You probably have a home office. If you have a 6 room house and one room is your office, then you can write off 1/6 of your utility bills and even 1/6 of your mortgage (however, this will depreciate your property and cause you to have further capital gains when you eventually sell it, so talk to your accountant whether you should or should not write off part of the mortgage). If you have a second phone line, you can write off that phone bill. If you have cell phones that are used for business, write that off as well. If you've bought a computer or printer or fax, etc. for your business, you may be able to write off the whole amt this year or you can write it off over it's useful life, and that varies depending on what it is. You can write off all of your supplies, such as copy paper, ink cartridges, pens, business cards, brochures, flyers, stamps, envelopes, folders, lockboxes, signs, Internet service, software, etc.

Pertaining to your education, you can write off courses and books you've bought that are business related, bootcamps and all associated costs with that (such as your airfare, rental cars, parking costs, cabs, tolls, hotel costs, and 50% of your meals and entertainment). By the way, most business owners cheat themselves on meal and entertainment write-offs. If you've bought a meal or had a beer or whatever and discussed business at all during that meal or meeting, then you should be writing off these costs. As an investor, if I discuss deals with another investor or talk to a relative about possibly providing me with private lending or take my realtor to lunch, you can bet that I'm writing it off. You should also be writing your REIA memberships.

Pertaining to your advertising, you can write off everything you've spent here.

Pertaining to travel around town, you can write off your mileage expenses one of two ways. You can write off a percentage of your total costs. such as if you use your vehicle 80% for business and 20% for personal, then you can write off 80% of your lease payment, 80% of your gas, and 80% of your maintenance and repairs. Or you can just write off the number of miles you've driven this past year for business (I forget what the exact write-off is, but it's around $0.315 to $0.32 per mile). Either way, however, you should have a mileage log showing how many miles you drove to where and for what purpose for each trip.

If you or your business have borrowed money for business purposes (whether it's a secured or unsecured loan, or on credit cards), you can write off the interest (this is why they tell you to use credit card for business and another for personal - it makes the accounting much easier).

You should also have good records relating to your costs associated with each house you own. Now these are handled a little differently if you bought a house in 1991 and then sold in 1992 (such as a rehab). Those costs, such as your rehab costs, generally offset the capital gains when you sell as opposed to be written off as regular business expenses. So account for your individual house-related expenses separate from your business expenses and give those to your accountant as well. You can take all of these deductions whether you have a corporation or LLC or not. If you're in the "or not" category, you essentially are a sole proprietorship by default.

So get your receipts, utility bills, credit card bills, expense logs, and appointment calendar together and make sure you've got everything your accountant will need and GO TO A GOOD ACCOUNTANT. You'll be glad you did.