Sunstrider

I'm opening my luxury tanning salon on or around the second week of november. Currently were taking bids from contractors and already filed for a sub chapter S for our corporation. Also were in the process of finding a trusty and reliable accountant. A question to you all before we talk to our accountant.

What is the tax season like? Because we will be done with buildout late this year, can we get back all that we spend for the salon from taxes. we've been saving all receipts for necesary tax purposes. But what are tax breaks like? and if we can't get back in full what we spent whats the percent like. Thanks also to all that answered my questions in the newbie room. You guys are great!!!

tanpartner

You will get depreciation on you major equipment but you never recover what you spend, from taxes. The goverment will not pay you to be in business. Talk to an accountant, a good CPA will be able to answer your questions on a level that you understand.

bjhcpa

Anything receipts involved in the actual build-out cannot be immediately written off. They have to be depreciated over a much longer period. Lease-hold improvements are usually depreciated over a 39 year period, so the percentage of those expenses you will get to write off in year one is very small.

The equipment is much different. Under the latest tax cuts, you can depreciate 50% of your equipment costs (as well as furniture, computer equip. etc.) immediately. This is called bonus depreciation. So if you purchased 100k in eqipment you would get to write off 50k in the year operations begin. The remaining equipment would get depreciated over either a 5 or 7 year period. So on that 100k purchase you would get about 60k in depreciation in year 1.

There is also a provision known as the Sec. 179 deduction. Under this provision you can now immediately write off up to 100K worth of equipment. This is done before the bonus depreciation. So if you purchased 100k worth of equipment you could take an immediate deduction. (you can thank the Bush tax incentives for that one). Keep in mind though, you can only use this deduction up to the amount of net business income you have from the business. Being that you are opening late in the year, you will not have a profit this year. The deduction would carry over to next year since it couldnt be used this year. I would recommend not taking the Sec. 179 deduction since you are opening so late in the year. It would become a carryforward deduction so you would be passing up on your bonus depreciation deduction which you will get regardless of whether you are profitable or not. The sec. 179 provisions are better suited for an existing, profitable business that is expanding or adding new equipment.

Hope this helps.