Tax Depreciation Quotes

What is thus improperly regarded as profit, instead of as part of capital, is consumed by the entrepreneur or passed on either to the consumer in the form of price-reductions that would not otherwise have been made or to the labourer in the form of higher wages, and the government proceeds to tax it as income or profits. In any case, consumption of capital results from the fact that monetary depreciation falsifies capital accounting.

The rental income served as a dividend, so to speak, but even at an early age, I focused more on the home appreciation. I came to understand the tax advantages of home ownership, implications of depreciation, and the opportunity to use the homes as leverage in borrowing money.

The fact that Trump paid no tax came to light when casino regulators issued a public report on his fitness to own a casino. Trump’s tax returns showed negative income. That’s because Congress lets big real estate investors offset their income from salaries, stock market gains, consulting fees, and other income with losses from depreciation in the value of their buildings. If these paper losses for the declining value of their buildings are greater than their cash income from other sources, real estate investors can legally tell the IRS that their income is less than zero and no federal income tax is due. Trump

Using other people’s money is literally the best way to reduce your taxes in the I quadrant. That’s because you can take deductions for the purchases you make with other people’s money. Depreciation on real estate is a particularly great way to take tax benefits on someone else’s money. You get a deduction not just for the portion of the real estate you paid for with your own money, but you also get a depreciation deduction for the portion paid for with the bank’s money.

Malls in the late forties and early fifties were risky. Suburban customers still believed in making major purchases in the central business districts of cities and towns, where they expected to find the greatest selection of merchandise and the most competitive prices. After the tax laws of 1954, this changed. Shopping mall developers were among the biggest beneficiaries of accelerated depreciation, and they most often located projects where the older strips met the new interchanges of major projects. With the new tax write-offs, over 98 percent of malls made money for their investors.

When the value of money is increased, then those are enriched who at the time possess credit money or claims to credit money. Their enrichment must be paid for by debtors, among them the State (i.e., the tax-payers). Yet those who are enriched by the increase in the value of money are not the same as those who were injured by the depreciation of money in the course of the inflation; and those who must bear the cost of the policy of raising the value of money are not the same as those who benefited by its depreciation. To carry out a deflationary policy is not to do away with the consequences of inflation. You cannot make good an old breach of the law by committing a new one.

Collateral Capacity or Net Worth? If young Bill Gates had knocked on your door asking you to invest $10,000 in his new company, Microsoft, could you get your hands on the money? Collateral capacity is access to capital. Your net worth is irrelevant if you can’t access any of the money. Collateral capacity is my favorite wealth concept. It’s almost like having a Golden Goose! Collateral can help a borrower secure loans. It gives the lender the assurance that if the borrower defaults on the loan, the lender can repossess the collateral. For example, car loans are secured by cars, and mortgages are secured by homes. Your collateral capacity helps you to avoid or minimize unnecessary wealth transfers where possible, and accumulate an increasing pool of capital providing accessibility, control and uninterrupted compounding. It is the amount of money that you can access through collateralizing a loan against your money, allowing your money to continue earning interest and working for you. It’s very important to understand that accessibility, control and uninterrupted compounding are the key components of collateral capacity. It’s one thing to look good on paper, but when times get tough, assets that you can’t touch or can’t convert easily to cash, will do you little good. Three things affect your collateral capacity: ① The first is contributions into savings and investment accounts that you can access. It would be wise to keep feeding your Golden Goose. Often the lure of higher return potential also brings with it lack of liquidity. Make sure you maintain a good balance between long-term accounts and accounts that provide immediate liquidity and access. ② Second is the growth on the money from interest earned on the money you have in your account. Some assets earn compound interest and grow every year. Others either appreciate or depreciate. Some accounts could be worth a great deal but you have to sell or close them to access the money. That would be like killing your Golden Goose. Having access to money to make it through downtimes is an important factor in sustaining long-term growth. ③ Third is the reduction of any liens you may have against these accounts. As you pay off liens against your collateral positions, your collateral capacity will increase allowing you to access more capital in the future. The goose never quit laying golden eggs – uninterrupted compounding. Years ago, shortly after starting my first business, I laughed at a banker that told me I needed at least $25,000 in my business account in order to borrow $10,000. My business owner friends thought that was ridiculously funny too. We didn’t understand collateral capacity and quite a few other things about money.

In West's guide, rule-of-thumb guidance comes in two formats that most valuation experts recognize:  Percentage of annual sales: If a business had total sales of $ 100,000 last year and the multiple for that business was 40 percent of annual sales, the price based on that particular rule of thumb would be $ 40,000.  Multiple of earnings: An earnings multiplier makes the most sense to prospective buyers. It directly addresses the buyer's motive to make money: to achieve a return on investment. In many small companies, this multiple is commonly used against what is known as seller's discretionary earnings (SDE), which are earnings before accounting for the following items: • Income taxes • Nonrecurring income and expenses • Nonoperating income and expenses • Depreciating an amortization • Interest expense or income • Owner's total compensation for one owner/ operator after adjusting the total compensation of all owners to market value

As any business person will tell you, the value of a traditional company is based on thirty times its EBITDA (earnings before income and tax depreciation of assets). If the company makes $1 million a year, it is said to be worth $30 million.

As any business person will tell you, the value of a traditional company is based on thirty times its EBITDA (earnings before income and tax depreciation of assets). If the company makes $1 million a year, it is said to be worth $30 million. But the Internet wasn’t measured in those terms because most people weren’t making any money. Instead, Internet companies were evaluated on the perception that someday, in the not-too-distant future, simply because of their connection to the Internet, they would be rolling in huge amounts of cash.

Collectively you and your coworkers now control your company. You’re more like citizens of a community than owners. You just have to pay a tax on its capital assets (the building and the land it’s on, machinery, and so forth), in effect renting it from society as a whole. (To preserve the value of the capital stock in your care, a depreciation fund must be set up for repairs and improvements.)10 Your tax goes into a public fund, which invests in new endeavors. More about that later. But the tax you pay also solves the problem of different production processes having

By the mid-1980s, the tax code allowed depletion or depreciation allowances that cut taxes for cement companies, Christmas tree farms, apple orchards, gravel pits, railroad cars, rubber importers, cattle growers, and many, many more. There was even a depreciation allowance for human beings; professional sports teams were allowed to write off their players as “depreciable assets” as they slowed down with age.

One of the benefits of real estate investments is that the real estate loopholes generally give you more deductions than you receive in cash flow. The best write-off of all is depreciation, which you can maximize to create paper losses. However, if your income is more than $150,000 per year, you cannot use those paper losses as deductions against your other income to reduce your taxes. That’s the spot Jean had been in.

Depreciation is the method through which the price of an expensive asset, like a vehicle or piece of equipment, is written off over the course of its useful life rather than all at once in a single tax year. Businesses often use depreciation to get back some of the money they spend on more expensive long-term assets during the time they are useful. Here’s how to calculate depreciation: Depreciation = Initial Investment / Expected Service Life

If you purchased a building for $200,000 but were eligible to depreciate $5,000 of its value, you would effectively pay just $195,000. If you take depreciation deductions and then sell the property, the $5,000 will be used to pay back those costs. A 25% tax is applied to the recouped funds. If the building were sold for $210,000, the net gain would be $15,000. However, $5,000 of that total would be considered recoupment of the tax break. A maximum of 25% of the amount reclaimed is taxed as regular income. The remaining $10,000 in capital gain would be taxed at the zero, fifteen, or 20% rates described above.

If you fully convert your home to rental property and use it that way for years before selling it, after you do sell you can either take advantage of the lower long-term capital gains rates or do a tax deferred exchange. For tax purposes, you get to deduct depreciation and all of the write-offs during the ownership and you can shelter up to $25,000 in income from active sources subject to income eligibility requirements. (Please

deductible, depreciable, and deferrable—are about reducing your taxable income. No investment does that better than real estate, which offers unprecedented tax advantages both while you own it and when you sell it. Millionaire

Leaving a position (like export or imports) unhedged is risky and can cause forex losses. Astral paid the price in FY09, when a 33 per cent depreciation in the Indian rupee left the firm with a forex loss of Rs 7.7 crore, wiping off 40 per cent of its profit before tax (PBT). Astral’s stock price declined by 84 per cent in March 2009 due to these losses, compared to its peak in January 2008. Finally,

John Tyson had his own esoteric set of rules of thumb for the company’s finances. Tyson Feed and Hatchery could take on long-term debt only if the interest payments amounted to half the amount the company could deduct from its taxes each year for depreciation of its equipment. If the company could deduct $1 million for depreciation, for example, it could only take on debt with interest payments worth $500,000 or less. This rule seemed arcane, but it was part of a philosophy that John Tyson drove home to his managers. Everybody could take on debt during good times. The banks practically threw money at you if they thought you would take it. But the real survivors thought about their debt in terms of the bad times that would inevitably come. Forty years later, when Don Tyson was running a company worth several billion dollars in annual sales, he would stick tightly to his father’s rule of thumb about debt payments and depreciation.

Market value of equity: The price per share or market capitalization. Market value of firm: The sum of the market values of both debt and equity. Market value of operating assets or enterprise value: The sums of the market values of debt and equity but with cash netted out of the value. When measuring earnings and book value, you can again measure them from the perspective only of equity investors or of both debt and equity (firm). Thus, earnings per share and net income are earnings to equity, whereas operating income measures earnings to the firm. The shareholders' equity on a balance sheet is book value of equity; the book value of the entire business includes debt; and the book value of invested capital is that book value, net of cash. To provide a few illustrations: you can divide the market value of equity by the net income in order to estimate the PE ratio (measuring how much equity investors are paying per dollar of earnings) or divide enterprise value by EBITDA (earnings before interest, taxes, depreciation, and amortization) to get a sense of the market value of operating assets relative to operating cash flow. The central reason for standardizing, though, does not change. We want to compare these numbers across companies.

Tax Consultants for the Medical Industry: A Specialized Service The medical industry is known for its complexity, especially when it comes to taxes. Healthcare professionals, whether running private practices or working in hospitals, often encounter unique tax challenges. This is where tax consultants who specialize in the medical industry come into play. Understanding Medical Industry Tax Regulations Tax regulations affecting the medical industry differ significantly from other sectors. From managing equipment expenses to handling employee benefits, healthcare providers face a myriad of financial obligations. Moreover, understanding how tax laws apply to medical practices ensures compliance with government regulations. A tax consultant with expertise in this industry can assist in navigating these intricate tax codes, ensuring accurate reporting and timely filing. Maximizing Deductions for Healthcare Providers One of the primary reasons healthcare professionals hire tax consultants is to maximize their deductions. Many medical practitioners are unaware of the potential tax-saving opportunities available to them. For example, medical equipment depreciation, office space rental, and staff salaries are just a few of the deductible expenses. Tax consultants ensure that healthcare providers take advantage of every tax break they qualify for. Staying Updated with Changing Tax Laws Tax laws, particularly those impacting the medical industry, are constantly evolving. It can be difficult for healthcare providers to stay up to date with these changes. By working with a specialized tax consultant, they can ensure compliance with new regulations and avoid costly penalties. These professionals help medical practitioners focus on their patients while handling the financial complexities in the background. In conclusion, tax consultants provide essential services to the medical industry. Their expertise ensures that healthcare professionals meet their tax obligations efficiently, saving both time and money.

Netting operating expenses and depreciation from revenues yields operating income, whereas the income after interest and taxes is termed net income.

There’s a special tax provision called Section 179 that lets business owners deduct 100 percent of the cost of personal property (such as desks and computers) in the year it was bought instead of having to depreciate it over time. In the past, rental property owners weren’t allowed to use this provision for personal property (such as appliances, carpets, and furniture) in their rental units. The Tax Cuts and Jobs Act (TCJA) removed that restriction, and now landlords can take full advantage of Section 179 deductions, up to a total of $1 million (but the deduction can’t create a net loss).

Unlike the house you live in, practically every expense attached to your rental property counts as a deductible business expense for tax purposes. Expenses to deduct include: • Mortgage interest • Property taxes • Insurance • Homeowners association dues • Advertising (to fill a vacancy) • Utilities • Repairs and maintenance • Pest control • Landscaping • Trash pickup • Depreciation What doesn’t count as an expense? Any major repairs or renovations you perform count as capital expenditures that get added to the cost basis of the property, effectively reducing your taxable income when you eventually sell.

Depreciation gets special IRS attention, and requires Form 4562. To fill out this form (whether you’re doing it with DIY software or providing info to your accountant), you’ll need to know the basis of your rental property. The basis for depreciation is different than the overall basis because land does not get depreciated, and may change over time if you make improvements to the property. To get started you’ll need to know: • The original purchase price of the property • The list of closing costs (most closing costs get added to the basis) • Land value, which you can find on the most recent property tax assessment paperwork • Additions or improvements you made that will add value for more than one year (think replaced roof, not repainted rooms) • The date the property was “placed in service,” meaning made available for rent The

Every so often I see a tax return from a new, real-estate-owning client that doesn’t show depreciation. And it’s not because the client has owned the real estate for 40 years. No, it’s because for some reason the client or his or her accountant didn’t take the depreciation deduction. This is not only wrong—it’s also stupid. Why not take the deduction? If you don’t, you’re in essence cheating yourself. It makes no sense to me, but I see it at least once a month.

Depreciated

John Myers, who spent thirty-seven years at GE, ran its pension fund for years, and sat on the GE Capital board, explained to me the keys to the success of GE Capital: GE’s AAA credit rating, allowing it to borrow money very cheaply. “Banks weren’t even rated AAA at that time,” he said. “We borrowed money cheaper than anyone could.” GE could also use GE Capital to reduce the taxes GE would otherwise pay on earnings from its very profitable industrial businesses. Here’s how that worked: If, say, an airline bought a new jet, it would have an asset that would depreciate over time, and the airline could use the depreciation to reduce its taxable income. But, at that time anyway, most airlines didn’t make much money, if any, so the value of the depreciation deductions was of little use to them. But to GE, the depreciation—the tax deductions—would be very valuable as a way to reduce GE’s pretax income and therefore to pay less in taxes. With that logic, GE Capital would buy the jets, lease them to the airlines at commercially attractive rates, and then use the depreciation on the jets to reduce the pretax income at GE.

Let me show you how you can use a combination of 1031 exchanges and depreciation to never again pay tax on the cash flow or the gain from the sale of your real estate.

be sure to work with your tax advisor to figure out how much depreciation you will get each year and how you can use like-kind exchanges and other tax benefits to seriously reduce or eliminate your income taxes.

Winners include big corporations, with a major tax reduction from 35% to 21%, small businesses, with a 20% net income deduction, and real estate, with major depreciation incentives and the 20% net income deduction given to other small businesses.

She’d originally paid $200,000 for the property and took depreciation of $75,000 over the time she owned it. When she died, the property had grown in value to $300,000. If she’d sold the property for cash the day before she died, she would’ve been taxed on her gain of $175,000 ($300,000 less $200,000 plus the $75,000 of depreciation she’d taken). But since she didn’t sell the property, her son didn’t have to pay any tax when he sold the property for $300,000 three months after she died.

you get a depreciation deduction for the entire cost of the building, even if you borrowed all the cash to pay for it from someone else.

One of the keys to taking full advantage of depreciation is to quickly get as much of your deduction as you can.

you don’t only get depreciation deductions for buildings. You also get them for equipment. In many countries, this includes your car so long as you use it primarily for business. It could even include the portion of your house that you use for an office. There are tons of possibilities.

Remember that depreciation is a deduction, not a credit, so your benefit is based on your tax bracket.

your real estate investment doesn’t just give you tax-free cash flow. It actually reduces your taxes on your salary and/or business income, because while there is positive cash flow of $7,000, the depreciation deduction of about $27,000 gives you a tax deduction against your other income of $20,000 ($27,000 less $7,000 to offset real estate income). That $20,000 additional deduction against your other income is worth $6,000 of reduced taxes on your other income in a typical 30% ordinary income tax bracket.

Let’s say you own rental real estate that earns $10,000 each year in cash flow. Depreciation on this property is $15,000, so you get to report a $5,000 loss on your tax return ($10,000 positive cash flow less $15,000 depreciation equals $5,000 tax loss). In a 40 percent tax bracket, this $5,000 loss is worth $2,000 in tax savings to you.

Let’s say Pierre pays $1 million for his building, including the land. The land by itself is worth $220,000. Because even the government understands that land doesn’t wear out, there isn’t a depreciation deduction for the portion of the price that relates to the land. Still, that leaves $780,000 to depreciate. That means that every year Pierre will get a deduction equal to a set portion of the $780,000. How much Pierre gets to deduct depends on how fast the government will let Pierre depreciate the building. In the United States, for instance, commercial buildings are currently depreciated over 39 years. That means that Pierre would get a deduction each year of $20,000 for 39 years ($780,000 ÷ 39). That’s about 2.5 percent per year.

Depreciation in the United States on residential property is about 3.6 percent per year.

the only practical difference between amortization and depreciation is in the name.

some investors treat depreciation as if it were not an expense by adding it back to operating income. For example, they use a metric called EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to analyze the earning power of a company and compare it to its competitors. This kind of thinking is flawed.

Trumpeting EBITDA (earnings before interest, taxes, depreciation and amortization) is a particularly pernicious practice. Doing so implies that depreciation is not truly an expense, given that it is a “non-cash” charge. Imagine, if you will, that at the beginning of this year a company paid all of its employees for the next ten years of their service (in the way they would lay out cash for a fixed asset to be useful for ten years). In the following nine years, compensation would be a “non-cash” expense—a reduction of a prepaid compensation asset established this year. Would anyone care to argue that the recording of the expense in years two through ten would be simply a bookkeeping formality?

EBITDA is an acronym for "earnings before interest, taxes, depreciation and amortization." It is computed by taking a company’s net income for a particular period and adding back the amount of interest expense, tax expense, depreciation and amortization for such period, all of which, under GAAP, have been deducted in arriving at the net income figure. Financial analysts consider EBITDA to be one of the most important measures of a company’s operating financial performance.

Suppose, for example, the CEO's year-end bonus is based on growth in earnings per share. Assume also that for financial reporting purposes, the corporation's depreciation schedules assume an average life of eight years for fixed assets. By arbitrarily amending that assumption to nine years (and obtaining the auditors’ consent to the change), the corporation can lower its annual depreciation expense. This is strictly an accounting change; the actual cost of replacing equipment worn down through use does not decline. Neither does the corporation's tax deduction for depreciation expense rise nor, as a consequence, does cash flow11 (see Chapter 4). Investors recognize that bona fide profits (see Chapter 5) have not increased, so the corporation's stock price does not change in response to the new accounting policy. What does increase is the CEO's bonus, as a function of the artificially contrived boost in earnings per share.

After more than a century of compulsory democracy, the predictable results are before our very eyes. The tax load imposed on property owners and producers makes the economic burden even of slaves and serfs seem moderate in comparison. Government debt has risen to breathtaking heights. Gold has been replaced by government manufactured paper as money, and its value has continually dwindled. Every detail of private life, property, trade, and contract is regulated by ever higher mountains of paper laws (legislation). In the name of social, public or national security, our caretakers "protect" us from global warming and cooling and the extinction of animals and plants, from husbands and wives, parents and employers, poverty, disease, disaster, ignorance, prejudice, racism, sexism, homophobia, and countless other public enemies and dangers. And with enormous stockpiles of weapons of aggression and mass destruction they "defend" us, even outside of the U.S., from ever new Hitlers and all suspected Hitlerite sympathizers. However, the only task a government was ever supposed to assume - of protecting our life and property - our caretakers do not perform. To the contrary, the higher the expenditures on social, public, and national security have risen, the more our private property rights have been eroded, the more our property has been expropriated, confiscated, destroyed, and depreciated, and the more we have been deprived of the very foundation of all protection: of personal independence, economic strength, and private wealth.

Furthermore, we do not think so-called EBITDA (earnings before interest, taxes, depreciation and amortization) is a meaningful measure of performance. Managements that dismiss the importance of depreciation - and emphasize "cash flow" or EBITDA - are apt to make faulty decisions, and you should keep that in mind as you make your own investment decisions,