Hospitality property owners and managers are always looking for ways to save money. One way to do so is to pay attention to tax details particular to the business owner. Here are a few tips to keep in mind, courtesy of Grant Thornton's Construction Real Estate and Hospitality Industry Group. For more tax tips, go to www.grantthornton.com/taxtips or email [email protected].
1. ÂReview The Pension Protection Act of 2006. The Act introduces major changes to previous pension rules, with a primary focus on more stringent funding requirements for defined benefit plans and permitting the use of automatic enrollment in 401(k) plans. It also includes several significant tax incentives and retirement savings for your employees by making existing rules permanent. In addition, important changes are made to charitable giving, including a new provision allowing tax-free distributions from IRAs for charitable purposes.
2. ÂAssess tax credit potential. Your tax professional can inform you of specific tax credits that may be relevant to your business. For example, the tip credit and certain general business credits, such as the welfare-to-work credit and the work opportunity tax credit, can provide significant tax savings for the hospitality industry.
3. ÂConsider establishing a separate entity to own and lease fixed assets used in your business. Often referred to as âœleasing companiesâ or âœprocurement companies,â these entities can help manage your assets and may significantly reduce your sales and use tax â a tax you collect and remit regardless of whether your company is profitable.
4. ÂDetermine if your company has overpaid sales and use taxes. Most companies pay a substantial amount of money to suppliers and state tax agencies, but often overlook potential sales and use tax exemptions. You may be eligible to file a refund claim to recover losses and put a system in place to prevent future overpayments.
5. ÂConsider expensing versus capitalizing repairs. You may be able to deduct the cost of certain repairs made to your property, depending on the type of property and the effect of the repair upon the property.