We’ve entered the last quarter of 2012; however, there is still plenty of time for real estate pros and other small business owners to take steps to lower their taxes for the year.

Here are 5 things you can do now to lower your 2012 tax bill:

1. Buy business equipment

If you’ve been thinking about buying equipment to use in your real estate business — whether it be a car, computers, software or anything else — do so by the end of the year.

In all likelihood you’ll be able to deduct the entire amount you paid for the item in a single year, instead of having to depreciate it over several years (this is not true for passenger cars, however, for which annual deductions are capped). The 2012 first-year tax deductions for business property purchases are extremely generous.

First, IRC Code Section 179 allows you to deduct in one year most tangible personal property you purchase and use over 51 percent of time for your business. The annual limit for this deduction in 2012 is $139,000. However, this deduction is limited to your net taxable business income for the year.

Also available is 50 percent bonus first year depreciation for most purchases of new equipment and software during 2012.

2. Establish and fund retirement plans

One area where successful self-employed people are often better off than employee is retirement plans. The government allows the self-employed to set up retirement accounts specifically designed for small business owners. These accounts provide enormous tax benefits — tax deductions for plan contributions and tax deferral on investment earnings until retirement. There are an array of retirement accounts available — solo 401(k)s, IRAs, SEP-IRAs, Simple IRAs, and Keogh plans.

5. Donate to Charity

If you itemize your deductions, you’ll lower your 2012 income taxes by donating to charity by the end of the year. You can donate money, property, or both, to any qualified charity and take a deduction.

If a charity has obtained a determination letter from the IRS recognizing its status as a 501(c)(3) public charity, then it is qualified for tax purposes and donations to it are deductible. Many nonprofits include copies of their IRS determination letter on their website and their taxpayer identification number on fundraising solicitations so donors know they can deduct donations to their organization.

The only 501(c)(3) organizations that are automatically considered qualified organizations (without a determination letter from the IRS) are churches and other religious organizations.

The IRS maintains an on-line search tool, Exempt Organizations Select Check, that allows users to select an exempt organization and check certain information about its federal tax status and filings — including whether the organization is eligible to receive tax-deductible charitable contributions. This service replaces a list of qualified organizations, called Publication 78, formerly published by the IRS. Other organizations maintain extensive lists of nonprofits. For example, the website www.guidestar.org lists over 1.5 million nonprofits.

Make sure to keep records of all your donations.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×