With tax season now behind us, except for all of those who are on extension, tax planning takes a new turn. People are going to senior fairs, home shows, boat shows. It’s great to get out of the house and start getting out into the world again and everybody has some kind of wish list and plan for the summer; it is so short after all. If you’re about to invest in a boat (I use the word invest with tongue in cheek as a boat as a whole and the ocean that you pour money into) or in landscaping for your home, new windows, new roofs, whatever you’re up to, there just may be a tax component involved. Many people wait until they’re sitting in front of the tax man with the cold wind whistling outside to start thinking about what they can do to properly limit their tax exposure, when the best time to figure out what’s going to be tax deductible is when you’re buying those items!
For instance, there are energy credits still available in the tax code, even after the Trump tax code changes. But is it windows? Is it doors? Is it heat pumps, shingles? Well, you might have a list of home improvement projects and in your mind this year you’re thinking, “I’ll do the roof and next year I’ll do the windows”. If they both need to be done, check with the tax code first. Perhaps windows are an energy savings credit this year, whereas roofing is not. You should always take whatever available tax credits are current because they often change or even simply go away. It seems to be a shell game with the IRS, moving them around depending on their needs or perhaps the lobbyists needs in Washington. Don’t us a cynical, you know it’s true.
OK, so what do I do with this information?
If you’re about to make that purchase, home improvement, whatever it may be, see if there is a there a way to properly take advantage of any tax savings. While home improvement is the easy one, I also mentioned a boat. How can you tax deduct a boat? I can’t tax deduct my boat!?
Of course you can. There are lots of boats that are on people’s 1040s and corporate returns every year from business uses.
Become a fishing guide, start a ferry service to island camps and their guests. There are people who tax deduct their boat every year. Being from New England, fisherman all up and down the coast of Maine and Massachusetts would beg to differ if you said “I can’t deduct my boat”.
We understand. You’re just thinking about buying a boat and going water skiing. You can’t deduct that right? Chances are, you’re right, you can’t. But are you thinking about any business purpose related to your boat, that when it’s not in service for your business, you might still throw a pair of water skis behind and enjoy yourself here and there. We’re not talking about taking 100% deduction. We’re talking about being fair and honest. But there is documentation, even ownership and title issues, that you should think about if your boat could be put into service as a schedule C business or other, before you buy it.
So again, the conversation circles back to our point this week, and that is simply, don’t buy anything or spend anything without calling your tax planner and saying “Hey, this is probably a stupid question, but I’m about to go buy…X…Is there any way that could be tax deductible?” If you ask that question 10 times a year of your tax planner, they will not tell you to stop calling.
They’ll congratulate you for calling when you’re about to expend capital. Then they will simply answer yes, no, or maybe, and help you walk through the decision tree.
Call your tax planner when you’re about to spend money this summer. Don’t have a tax planner? Shame on you! In that case, your tax plan is already written. It’s the IRS gets more of your money!