The annual income tax allows losses resulting from depreciation and amortization of the property used or maintained for business activities to be deducted. Real estate property in the form of land or land is not depreciated, however, maintenance and construction costs are deductible. In contrast, personal property and inventory of shares in the financial market cannot be deducted.
Depreciation is incurred when an asset is put into service and ends when it is taken out of service. The taxpayer has the possibility to choose one method among several to make the calculation. In general, the depreciable property value is recovered by defining a rate for a period of time for the property in the company’s statute, for example: X% is defined for a property in X years. Buildings depreciate on a linear basis over a period of 27.5 years, residential, and 39 years, for commercials.
Net operating losses as a general rule is recorded to offset taxes for 2 years retroactively or 20 years to the future. Check the www.taxfyle.com/sales-tax-calculator for calculating the taxes.
Ordinary company deductions include expenses on employee wages, real estate rents, maintenance on machinery, interest on loans, bad loans, charitable contributions, depreciation, amortization, advertising, profit sharing, etc.
The initial expenses of the company, made for the normal development of the business, are only deductible in the dissolution of the company. There is an option to deduct expenses of up to $ 5,000 in the year the company was founded and to deduct the remainder proportionally in 180 months counting the month the company was opened.
Earning Stripping rules
In the result of the participations, for people who should not be taxed in the country, the so-called “earnings striping” is applied. To avoid this fee, a company’s interest deduction for “disqualified interests” is limited by the company’s debt-to-equity ratio exceeds 1.5 to 1. Carryovers of unallowed interest expenses are deferred for future years. Interest deductions that do not fit expenses are deferred for future years.
If the US company exceeds the 1.5 to 1 debt / equity ratio and the interest is paid or accrued to a foreign person where less than 30% tax is withheld, and the US taxpayer’s net interest debts is greater than 50% of the taxable income, the excessive interest expense, relative to the sum paid abroad, is not deductible, and the amount is deferred for the year in which such expense exceeds the limit of fifty percent.
The interest that is subject to this limitation includes that paid to third parties if they are also exempt from income tax or a foreign person who guarantees these loans. United States tax law also includes provisions that generally postpone the deduction of certain expenses payable to a related party until the national pays the debt.