Bichon Frise wrote:
Interesting, such as?
I am sure there are some that exist (which is why I said there are very few that exist). As a small business owner and someone with a "joe job" and works with the accounting/economics etc for projects ranging from the $10's of millions to the $10's of billions, I have yet to see any decision made where the tax deduction was the "tipping point" or the main reason for doing a project. The closest I have ever come is a 12 billion dollar project I worked on where the point of sale occurred for the good had a high impact on project economics.
In my small business, early on we got caught up doing things b/c of the "tax deduction." And we found out we were spending too much money collecting "things" we didn't really need opposed to paying taxes and having money in the bank. We're in our 12th year of business.
So, perhaps my wording was poor. My point is, if you are collecting deductions and credits for the sake of it, you're probably making poor decisions. To me, they have always been "icing on the cake" and the decisions made stand on their own merits and independent of the tax deductions. E.g. I wouldn't force my kids to go to college just so I could take credits/deductions. Another example, we unfortunately are over the amount for the standard deduction every year. Certainly, I wish we could take the standard deduction, but since we make decisions independent of if we get a tax "break" or not, we still claim over the standard deduction. OR, are actions are not based on getting a bigger tax deduction.
YMM will certainly V.
Bichon, I generally agree with your conclusion that decisions have to be made on their own merits before bringing the tax management into play. But I'll give you three examples where the tax deductions and credits can be used to soften costs or even make a slight positive amount.
1. I used to be an executive in a business. We routinely spent money on various sorts of training and we could fully deduct it of course. We got a new guy in who was really good at getting workforce development grants. We ended up getting training 90% paid for by our state through "grants" yet could still deduct the cost of training for federal taxes so that we actually made money by sending people to training.
2. Same business. I traveled a lot doing business development. Many of our projects were federal. Under the FARs my travel expenses pre contract had to be treated a certain way. So I always combined trips with visits to non-fed prospects/customers in the same areas. The tax savings added up.
3. Personally, our state offers quite a few credits that are also federal deductions. So I can donate to working poor for example and directly reduce my state taxes while also taking a federal deduction. That means I effectively make about 1/3 of my donation as positive cash flow. I can do this for a total of about $1000 a year ($3000 in donations) in my state.
The point is, I agree in principle that decisions have to stand on their own. But fine tuning the details can lead to relatively significant savings because of tax rules.