Tax Facts

Information to help individuals and small business navigate our complex Tax Laws. Not to be construed as tax advice. Contact your hired tax advisor for your specific tax situation and advice.

Property That's Not Eligible for Depreciation


Rules apply (of course!) when you want to deduct long-term assets in a business and on your business tax return. If it's property - real property, personal property, or otherwise - you can only depreciate or expense the cost of purchasing that property if it's used in your business and if it wears out or gets used up over time.

So, for example, if you have a rental property and it's a single-family house on land, you can only deduct (and in this case it becomes a depreciation deduction) the house portion of what you purchased and not the land. Land does not wear out. (There are exceptions to this when you are purchasing land specifically for oil drilling - then you have a deduction each year for the depletion of that oil in the land. But that's a different and special case.)

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Hiring a Family Member?


Thinking about hiring your child to work for your business? The IRS expects that you will be following some rules if you decide to, so it's a good idea to become familiar with those rules prior to bringing Mini Me on board and taking the payroll deduction for it. Here are a few main ones:

The child must actually be an employee and that means they must actually be doing some productive work for the business and not sitting in a chair playing video games. On the other hand, the services they provide don't have to be along the lines of "resident genius" either. As long as they are doing work that is common and accepted for your type of business and helping things move along in the daily grind, then you're okay.

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Business Entity Concept in Bookkeeping and Taxes

Many clients ask about setting up a small business and which entity they should select: LLC, Corporation, S Corporation, Partnership, etc. The answer is "it depends" and there are many factors to consider. To be sure, a knowledgeable advisor can help you choose the right one. We recommend hiring and Enrolled Agent, a CPA or a business attorney to do so.

There is a concept that does apply to any business entity you may choose for your small business and it is an accounting/bookkeeping concept called the Business Entity Concept. This concept is based upon an assumption that every business - no matter how big or small - and regardless of the legal entity of choice, is to be accounted for separately from the owner.

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