As the end of the year approaches, we are all involved with Holiday plans and celebrations with family. On the business side, it is end of year planning. I wanted to discuss a couple of things you should be sure to consider this time of year.

First is end of year tax planning. This is the time to consider whether to pull in expenses and push out collections based on how your tax picture is shaping up. If you need more deductions and have a corporation, you  may want to consider Section 179 expensing. This section allows you to take up to $125,000 in deductions (2007) on equipment “that is new to you” used in your business.

Examples of equipment that qualifies for this expensing is computers, printers, monitors and pretty much any kind office equipment or office furniture. Vehicles between 6,000 and 14,000 lbs. can be expensed only up to $25,000.

The asset must be used at least 50% for business in the first year it is placed in service to be eligible for the Section 179 deduction. The cost eligible for the deduction is the business usage percentage. Oh, and deductions are only up to the net income of the business. So, these deductions cannot create a net loss for the company.

This expensing cannot be used for property held for the production of income such as rental property and no real estate.  So, even though the sale of a quick-turn property in the corporation will qualify as business income, the property purchase is not eligible for Section 179 deductions.

The second area is reviewing the property you have currently. Make several lists of them from best to worst in the following categories:

Subjective -

A. Ease of rental - never empty long

B. Quality of Renters

C. Neighborhood has good appreciation, stable or seems to be improving

D. Quality of construction

Objective -

A. Has best net cash flow

B. Best cash on cash return

C. Least ongoing maintenance

D. Distance from home or office

The lists should be done quickly without a lot of thought. What you will notice is that one or more will show up near the bottom of each list (worst end of the list). These properties should be targeted for replacement next year. You may want to 1031 exchange them into better property or just sell and pay the capital gains tax. By doing this evaluation each year and acting on it, you will be constantly upgrading your portfolio.

Also, you should already have been evaluating your entity structure for next year and making any changes or additions, so you are ready to go January 1. As you build assets, you need to take the steps to assure you preserve what you have worked so hard for and minimize taxes.

Oh, and consider the Advanced Strategies Conference in January.  It provides a great start for the experienced investor for the year.