Check out each of these practice expense categories for increased write-offs.
Sorting through that pile of checks you wrote last year to keep your practice going takes effort, but your reward will be extra tax savings. Here's a rundown of good places to hunt for deductible expenses you might otherwise overlook, and some ways to maximize the tax benefit of the write-offs you can claim for 2006.
New equipment purchases
It's important to distinguish between the two. Expenses for repairs that keep your office in normal, efficient operating condition-for instance, patching minor damage to fixtures or repainting walls-are deductible on your return for the year you incur them. But improvements that add to your property's life or value, like replacing the roof, must be depreciated, so recovering their cost takes years. If you contract for both types at the same time, the IRS might consider all the work as a single improvement project and require you to depreciate the entire cost. For more information, see IRS Publication 946, How to Depreciate Property, at http://www.irs.gov.
Last year a Milwaukee neurologist had the walls of his reception room patched and repainted and added a bathroom. Following his accountant's advice, he instructed the contractor to submit separate proposals and invoices for each category. Accordingly, he can claim all of the repair costs on his 2006 return, while depreciating the rest.
An exception to the rules for building improvements extends to work that's done to provide greater access for the elderly or disabled. If you spent, say, $20,000 on such facilities last year, you can write off a maximum of $15,000 for 2006 and add the remaining $5,000 to your building's cost basis.
Also in the area of improvements, if you're taking steps to boost the energy efficiency of your office building, the Energy Policy Act of 2005 may allow you to claim a deduction on your 2006 return for a portion of your expenses as owner or lessee. Write-offs are available for improvements to interior lighting systems; heating, cooling, ventilation, and hot water systems; or the building's shell. The amount of the deduction depends on the degree of energy efficiency achieved, as certified by a licensed engineer or contractor.