2014 70 Proven Year End Tax Planning Strategies

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MAHAN & ASSOCIATES , LLC

Phone 615-883-7800 Fax 615-883-7840 www.mahanassociates.com

70 Proven Year-End Tax Planning Strategies

Year-end is upon us, and we should plan throughout the year to implement sound TaxPlanning Strategies. If we have not yet planned your strategies, now is the time fordoctors to implement changes that can cut taxes in 2014 and 2015.

1. Claim a Section 199 manufacturing deduction (DPAD) related to the onsite production of crowns, inlays, onlays, and other restorations, and lab items such asretainers, study models, appliances, and records. In the past two years, wehave generated over $835,000 in DPAD deductions for our clients,resulting in tax refunds of over $267,000. Thats an average of

almost $15,000 per client!

2. Tax Projections, by knowing where you are at with your tax liability you can better plan on what strategies to implement.

3. Home Office Deductions. The laws have now has paved the way for us to have aClinical office and an Administrative office. Therefore, everyone could/shouldhave a home office. Additionally, it would make your commute deductible.

4. Grouping and Account Aggregation. If you qualify, you can deduct those passiverental losses. If you have been carrying them forward for several years we candeduct all in one year. This provides a nice deduction and a great use of timevalue of money.

5. Manage Repairs vs Capital Improvements. Be sure to discuss thoroughly with youtax preparer the type and condition of the repair vs a true capital improvement.

6. Auto Deduction for Working Spouse, dont forget to deduct the spouses auto ifshe works for the Practice. Dont deduct on Schedule A , you will be caught bythe 2% itemize limitation. Therefore turn those expenses or mileagereimbursements into the practice and get reimbursed, thereby getting the entirededuction.

7. Proper Allocation of Tax Prep fees, all too often we see where the entire tax prepfees are put on Schedule A miscellaneous expenses and are lost to the 2%threshold. We allocate the prep fees over all the tax return, thereby losing verylittle of this deduction.
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8. Turn your Gifts into Advertising, There are limitations on the amount ofdeduction of $25 per individual per year. Let s put our name on the items andmake it advertising.

9. Dont forget the use of Sec. 125 Cafeteria Plans

10. Because we function as cash basis in our Practices we can Defer/Accelerate Income and Deductions.

11. Deduct the business use of you cell phone for you and your spouse (if he/sheworks in the business). We recommend a 15-20% safe harbor.

12. Look through your closets at the end of the year for those non-cash contributions.

13. If you have paid off you home mortgage look to use the Bunching Strategy(consult you advisor for details).

14. Utilize Achievement & Safety awards as a way to save taxes and get tax freeincome to employees.

15. Review the Green Preservation Trust, i.e. a Land Trust

16. Dont forget to use your 100K HELOC instead of consumer debt .

17. Consider hiring your children to work on your rental properties.

18. If you invest in real estate are you an Investor or a Dealer? The classification boilsdown to the facts and circumstances. This could go a long way in what is besttax-wise.

19. Explore the Benefits of S Corporations

20. Lease or Buy your Business Auto, that is the question, the answer

21. How to deduct visiting your parents and get them tax free money

22. Increase your tax deductions by converting to a Corporation.

23. Make maximum use of the annual Section 179 expensing election to immediatelywrite off new or used equipment purchases of up to $25,000 made during 2014.Congress is expected to act after the election to restore the write-off amount to$500,000 for 2014 and 2015.


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24. Looking for a way to minimize or eliminate the new 3.8% Medicare tax on personal investment income? Consider these options: increasing retirement planand IRA contributions, increasing salaries to employed children, giftinginvestment assets to lower bracket family members or charity, investing in tax-free bonds, and reducing capital gains through tax-free exchanges and harvestingcapital losses.

25. Get the maximum write-off by purchasing a sport utility vehicle rated at 6,000 pounds or more fully loaded on or before December 31, 2014 in order to obtain asix-year write-off, and to achieve eligibility for the $25,000 expensing election (if

business use is at least 50%), and 50% bonus depreciation (new vehicles only ifrestored after the election as expected). Qualifying SUVs include the BMW X5,Cadillac Escalade and SRX, Lincoln Navigator, Chevrolet Suburban, Trailblazer(Model SS) and Tahoe, Ford Expedition, Explorer, and Excursion, GMC Yukonand Acadia, Envoy Denali, Hummer H1, H2, and H3, Mercedes M, G, GL, MLand R-Class, Range Rover, Toyota Land Cruiser and Sequoia, Land Rover LR3,Porsche Cayenne, Volkswagen Touareg, Jeep Grand Cherokee SRT8 andOverland, Mercury Mountaineer, Nissan Armada and Pathfinder, Saab 9-7X,Dodge Durango, Audi Q7, Chrysler Aspen, Infiniti QX56, Saturn Outlook, VolvoXC09 and the Lexus X570 and GX470. Note that many pick-up trucks alsoqualify (Toyota Tundra, Dodge Ram, etc).

26. Meals can be fully deductible, if you separate the expenses correctly. Make surethat all meal expenses for staff meetings, functions, and outings are classied asmeetings and seminars, since they remain fully deductible under Section 274(n)of the internal Revenue Code. In addition, separate fully (100%) deductible travel,lodging, and continuing education expenses from meal and entertainmentexpenses (50% deductible) for tax reporting purposes.

27. You may be eligible to claim the small business health insurance tax credit, up to50% of premiums paid for staff health insurance coverage. File amended practicetax returns for 2011, 2012, and 2013, if the credit (then 35%) was missed, ormiscalculated.

28. Do you own the building where your office is located? If it was purchased orconstructed after 1986, and cost more than $500,000, consider implementing acost segregation study. This will allow you to reclassify some costs as non-structural for faster depreciation write-offs.

29. Are you covered under a qualifying high deductible health insurance policy? Youshould establish a Health Savings Account (HSA) and fund the maximum tax-


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deductible contribution to cover future medical expenses. Doctors can contributeand deduct up to a maximum of $3,300 for a single policy and $6,550 for a family

policy in 2014. In addition, doctors and spouses age 55 or older can makeadditional tax- deductible "catch up contributions of $1,000 each annually.

30. Let us show you the payroll tax savings that may be available from electingSubchapter S-corporation status for your practice, effective January 1, 2015. Inmost states, doctors will be able to signicantly reduce payroll taxes (includingnew 3.8% payroll tax on rents and personal investment income) by taking a lowersalary, with the remaining prot distributed as a dividend (not subject to payrolltaxes). S status can also reduce income and payroll taxes on their practice sale,and lower IRS audit risk and exposure.

31. Deduct actual state and local sales taxes paid as an itemized deduction for thosedoctors who itemize and whose sales taxes exceed the state and local incometaxes otherwise deductible.

32. If not otherwise rented, rent your personal residence or vacation home to yourcorporation for board of director meetings, shareholder meetings, staff retreatsand staff training, or other business meetings. The rent paid by the practice will betax-deductible, while up to 14 days of rental income can be received tax-free

pursuant to Section 280A(g).

33. If possible, consider a Section 1031 tax-tree exchange to avoid federal and stateincome taxes on the sale of the practice assets, ofce building, o r other real estateheld for business or investment purposes.

34. Make sure that the practice reimburses you for all business expenses paid personally during 2014, such as travel, meals and entertainment, business carexpenses, dues and subscriptions, advertising and promotion, continuingeducation, safe deposit fees, tax return and planning fees, investment expenses,etc. This is another way to increase tax-free income.

35. Is the practice paying all medical insurance premiums for you and your family?Medical insurance premiums are now 100% deductible for all doctors.(Ccorporation, S corporation, unincorporated, etc.), even if no staff coverage is

provided, since the Obamacare non-discrimination rules are not yet in effect.

36. Take advantage of available 50% bonus depreciation to write off one-half the costof other new assets purchased in 2014, including leasehold improvements made tothe interior of office buildings not owned by the doctor. While this tax break


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expired in 2013, Congress is expected to restore it for 2014 and 2015 after theelection.

37. If you make improvements to make your facility more accessible to thehandicapped or disabled, make sure that the practice takes advantage of theDisabled Access Tax Credit of up to $5,000 annually for the cost of buildingimprovements, such as expansion of hallways, repaving parking area, installingwheelchair accessible ramps, or new ADA-compliant bathrooms, or adding newcarpet or floor coverings, or for equipment purchased to provide services to thedisabled.

38. In addition, when improvements are made to remove architectural andtransportation barriers to provide services to the handicapped and elderly, makesure that the corporation fully utilizes the $15,000 expensing election underSection 190 of the tax law for those expenditures.

39. Doctors over age 40 with a younger staff can now fund a combined safe harbor"401(k) prot sharing plan (with a 6% match) and cash balance dened benet

pension plan to save thousands in federal and state income taxes. Doing so willmaximize tax-deductible retirement plan contributions (more than $115,000annually).

40. Increase business deductions by maximizing business related dues andsubscriptions to magazines, newspapers, and other periodicals paid through the

practice, and through purchasing artwork for the practice and business luggagethrough the practice with tax-deductible dollars.

41. Eliminate non-deductible travel costs by making sure that all travel is business-related (continuing education meetings, consults with colleagues, board ofdirectors meeting, etc.). Make sure to document consults with colleagues, send aletter to the doctor conrming your visit, as well as a follow -up letter thankinghim for the opportunity, outlining what you learned from the four hour in- ofcevisit, and inviting him to visit your practice.

42. Utilize a home office! You can perform confidential duties such as practiceaccounting, payroll, and personnel matters in your home office. By doing so

purchases such as a business computer and other office furniture and equipmentare deductible when purchased through the practice for this purpose.

43. Assure full deductibility of miscellaneous expenses such as tax return fees, safetydeposit box rentals, dues and subscriptions, investment expenses, etc., by payingthem through your practice and deduct them on your practice tax return.


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44. Pay a bonus to the doctor in your C Corporation to r educe corporations regulartaxable income to zero at year-end, if appropriate. Retaining earnings in your Ccorporation makes sense only to the extent necessary to fully utilize existing netoperating losses and the tax credits discussed above.

45. Instead of reimbursing yourself for mileage at the standard 56 cents per mile rate, pay all operating expenses for your business automobile through your practiceand deduct the actual cost of operation. The auto expenses which should be paidthrough the practice include gas, oil, maintenance, repairs, taxes, tags, licenses,and insurance. Keep a log on a three-month basis, and show any personal usage asincome on your W-2.

46. Is your spouse on your payroll? If not, you are missing out on big deductions!Employ your spouse through the practice and pay him or her an annual salary of$3,000 (generally) in order to quality the spouse for minimum Social Security

benets, the child care credit, as well as fully deductible practice travel and fringe benets, while minimizing payroll taxes. However, if your family has two ormore children under the age of 13, and child care expenses exceed $3,000annually, increase the annual salary to equal the annual child care expenses, up toa maximum of $6,000 annually. Moreover, if your practice operates a SIMPLE-IRA retirement plan, increase the spouses salary to $13,000 ($16,000 if age 50 orolder), in order to qualify the spouse for the maximum SIMPLE-lRA deferral of$12,000 ($14,500 if age 50 or older). If your practice sponsors a 401(k) protsharing plan, increase your spouse's salary to $19,000 ($25,000 it age 50 or older)to qualify for the maximum deferral of $17,500 per year ($23,000 if age 50 orolder). Pay the spouse the highest reasonable salary in exchange for his or herservices in order to generate a larger tax deductible retirement plan contribution,if the practice operates an age- based retirement plan (target benet pension plan,cross-tested or age- weighted prot sharing plan, or d efined benefit pension plan).

47. Does your practice have a retirement plan? Take advantage of further deductions by setting one up on or before December 31 in order to qualify for a 2014 taxdeduction. Procrastinators have until April 15, 2015, (or October 15, 2015 ifextension led) to establish a SEP and still deduct contributions on your 2014return. Make sure your corporation utilizes the tax credit for small employer

pension plan startup costs of up to $500 annually for the rst three years of the plan.

48. For each spouse age 50 or older, consider contributing the maximum catch up"contribution to your 401(k) prot sharing plan ($5,500 annually) .


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49. Maximize your pension contribution allocation by contributing an amount($52,000 in 2014; $57,500 if age 50 or older) to your practices retirement plan,as long as at least 70% of the amounts are allocated to the doctor and spousesaccount. If receiving less than 70% of the total amounts allocated, contact us tohave a plan design analysis performed to determine what retirement plan will

prove most cost effective for your practice.

50. If the doctor is age 40 or older with a younger staff, consider adopti ng a safeharbor" 401(k) cross-tested profit sharing plan to maximize tax-deductiblecontributions for the doctor and spouse, while limiting staff funding costs.

51. If the doctor is age 40 or older with a younger staff, consider adopting a safeharbor" 401(k) cross-tested profit sharing plan to maximize tax-deductiblecontributions for the doctor and spouse, while limiting staff funding costs.

52. Consider establishing a separate retirement plan for sideline businesses run byyou or your spouse and maximize tax-deductible contributions to it.

53. Consider funding non-deductible IRA contributions for the doctor and spouse of$5,500 per spouse ($6,500 if age 50 or older) to avoid the 3.8% tax on personalinvestment income. Establish these as tax-free Roth IRA accounts for marrieddoctors with less than $181,000 of AGI, or as regular non-deductible IRAaccounts otherwise.

54. Consider re-characterizing your 2014 Roth IRA conversion if taxes will be paid inthe highest marginal tax brackets (35% / 39.6%).

55. Avoid income taxes on the Roth IRA conversion by rolling taxable IRA amountsinto existing retirement plans (if permitted).

56. Assure future IRA earnings will grow tax-free by converting your non-deductibleregular IRA contributions into Roth IRAs.

57. Considering selling your practice? After the sale, make sure to convert additionalamounts from taxable IRAs to Roth IRAs to take advantage of all availableitemized deductions and exemptions, and the 10% / 15% tax brackets.

58. Put your children on your payroll! Employ children age 6 or older through your practice, in order to fund college savings, private school costs, etc., on a tax-deductible basis. Each child can earn $6,200 tax-free in 2014 in exchange forservices actually rendered.


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59. Start your childrens college funds and save tax dollars! Establish and fund themaximum annual contribution of $2,000 per year to a Coverdell Savings Account(formerly known as Education IRAs) for each child in order to shelter investmentearnings for future tax-free payouts to cover college and/or private school costs.

60. Consider a Roth IRA for each employed child and contribute $5,500 for each in2014. While these contributions are non-deductible, principal can be withdrawntax-free for college, and all future earnings will be tax-free when withdrawn afterage 59 .

61. Another way to reduce income taxes is by shifting income-producing property(dental and ofce equipment, ofce building, etc.) to a family limited partnership(FLP), Subchapter S corporation, or limited liability company (LLC), set up on

behalf of your children age 19 or older, or children who are full-time students age19-23, if their earned income is more than half of the amount of their support.

62. If you are planning to sell appreciated property such as stocks, bonds, or realestate, consider transferring them to your children age 19 or older or children whoare full-time students age 19-23, if their earned income is more than half of theamount of their support, or to an FLP or LLC set up for their benet. Thereafter,they can sell this appreciated property and have the capital gain taxed at rates aslow as 0% if their earned income equals more than half of their support (andavoid the 3.8% payroll tax), and use the proceeds to fund educational and othercosts.

63. Do you self-rent your office building or equipment? If so, consider increasing therent charged to your practice for use of the professional office building and/orequipment to the highest reasonable rate if this property is owned by a FLP, LLC,or Subchapter S corporation on behalf of your children, to increase the incomeshifted to lower tax bracket children.

64. Need funds for capital improvments or working capital? Have the family limited partnership FLP/LLC loan funds necessary to the corporation at a high interestrate (15%), or begin operating an in-house lab and/or records business, in order toshift additional funds from the corporation to your children on a tax-favored basis.

65. Additional tax savings can be available if you do not claim any college-agechildren as dependents on your federal or state income tax returns. Rather, havethem pay for their college education and living expenses from their own funds,custodial accounts, or by taking distributions from a family limited partnership.Through this strategy, your children will be able to claim a personal exemption($3,950) on their return, and are eligible for the American Opportunity


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educational tax credit ($2,500 a year during the initial four years), and LifetimeLearning credit ($2,000 educational tax credit during remaining years).

66. Gifts of property to qualied charitable organizations , in lieu of cash contributionscan increase charitable contribution deductions. Some examples of gifted propertyare stocks, bonds, artwork, or real estate that have gone up in value. The full fairmarket value of the property is tax-deductible as a charitable contribution if heldfor at least 12 months, and the gain is not subject to income tax.

67. Use a home equity line of credit to pay off debts or consolidate non-deductible personal loans as part of a home mortgage refinance to take advantage of record-low home mortgage interest rates.

68. Accelerate personal tax deductions by paying any state estimated income tax payments due in January before year-end; if incorporated, increase your stateincome tax withholding on your corporate salary before December 31.

69. Accelerate personal tax deductions by prepaying your home mortgage paymentdue January l, and by paying all real estate and personal property taxes due beforeDecember 31.

70. Consider selling personally owned stock, bonds, or mutual funds that havedeclined in value before December 31 in order to realize capital losses that canoffset capital gains reportable tor current and future years. Make sure that youdeduct up to the maximum of $3,000 of capital losses in excess of the capitalgains realized on your 2014 tax returns.

2014 70 Proven Year End Tax Planning Strategies

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