I’m excited to share with you information on a new law that went into effect a few weeks ago to help us vacation cabin owners as a result of the COVID pandemic we are working our way through.
The law, called the CARES Act, includes a provision that will allow cabin owners – and other businesses – to charge the losses against taxes we paid in previous years for up to the last five years. Some of the relief you can seek on your taxes under the CARES Act (as listed on the irs.gov website) include:
- waiving the carryback period in the case of a net operating loss arising in a taxable year beginning after Dec. 31, 2017, and before Jan. 1, 2021,
- disregarding certain amounts of foreign income subject to transition tax that would normally have been included as income during the five-year carryback period, and
- waiving a carryback period, reducing a carryback period, or revoking an election to waive a carryback period for a taxable year that began before Jan. 1, 2018, and ended after Dec. 31, 2017.
I’m working with a company called ACRS (Accelerated Cost Recovery Solutions) that specializes in helping with tax reduction on vacation cabins through a process called Cost Segregation, “a strategy for accelerating depreciation, reducing taxes, and increasing cash flow,” as their company puts it. The process is simple. Every item in your cabin has a monetary depreciation value that can be determined by someone like ACRS. Whether it’s a pool table, a kitchen set, or even the lamp in the corner of the living room, all of these items can be checked to determine what the value will be for reducing your bill at tax time. Having this study done can save you a bundle, and you only pay about 10 percent of what you get back in taxes for the study.
You should talk to your tax attorney or CPA to see if a cost segregation study is right for you, but in the meantime if you’d like to learn more about it you can check out the ACRS website for a bit more explanation on how the study works.
Right now they are doing a study of my cabins to help me figure out where I can save on my tax bill. I’ll let you know how it turns out!