Year-end tax tips for self-storage operators

December 18, 2014 0
Year-end tax tips for self-storage operators

You’ve barely shouted “Happy New Year” and made your New Year’s resolutions when it arrives—Tax Day, April 15.

Experts warn that the 2015 tax season could be a challenging one, thanks to pending congressional action, effects of Obamacare and new IRS regulations.

The start of the tax preparation season could be delayed if Congress fails to wrap up action on a long list of popular temporary tax breaks that expired at the end of 2013. In the past, lawmakers have extended them retroactively, but while the U.S. House approved the extensions in early December, the U.S. Senate didn’t get around to voting on them.

CPA Martha Weedon of Waxahachie, TX, said you still should gather documentation to take advantage of the deductions, even though they haven’t been extended by Congress.

Obamacare

Another tax issue that promises to complicate many 2014 tax returns is Obamacare, formally known as the Affordable Care Act.

“For the first time, people without medical coverage can be charged a penalty,” said Lester Strait, a CPA in Grapevine, TX. “Employers need to be careful with this law. The requirements change with the number of employees and can be very confusing.”

Storage operators should talk with their tax preparers to see whether they qualify for the tax credit to help offset costs associated with providing health insurance to employees.

Capitalization and appreciation

Meanwhile, a new IRS regulation that changes what must be capitalized and depreciated over time and what must be expensed takes effect in 2015.

business taxes

“There have been substantial changes as to what can be written off as a repair or must be capitalized and depreciated over time,” Strait said.

The new IRS regulation affects anyone who owns or leases property. Any facility owner who files a Schedule C, E or F, or a business return, will be required to include a filled-out Form 3115 (Application for Change in Accounting Method) with the 2014 tax return.

Getting things in order

Magen Smith, a CPA in New Iberia, LA, who once managed a storage facility, recommended that storage operators collect all tax-related receipts and paperwork well before the April 15 tax-filing deadline.

“They also should make sure that their [accounting] books are in good order, and that the books and banking are reconciled,” Smith said. “The better your bookkeeping system, the easier filing your taxes will be.”

Cost segregation

She also suggests that storage owners who completed construction in 2014 hire someone to perform a cost segregation study to see whether some of the costs can be deferred.

According to Houston, TX-based accounting firm O’Connor & Associates, cost segregation:

  • Decreases a facility’s income taxes, letting an owner invest the savings in capital improvements, reduce debt or simply improve cash flow.
  • Provides an immediate reduction in federal income taxes through increased depreciation.
  • Defers taxes on gains to a lower rate.

Aside from looking into cost segregation, Smith said, storage owners “need to review their accounts receivable to determine if there are debts that just can’t be collected that should be written off, and if they need to do collections on any accounts.”

Photos courtesy of Flickr/401(K) 2013 and Flickr/Jason Dirks

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