The sale of a principal residence is typically not reported on a taxpayer’s return because the taxpayer can exclude up to $250,000 ($500,000 if married) of gain from the sale of the personal residence.  In short, if the individual(s) have owned and used the residence for at least two of the five years prior to the sale, the gain ($250,000 if single or $500,000 if married) is excluded.  If married, either or both of the spouses must have owned the principal residence for at least two of the last five years prior to the sale.

Similarly or maybe because the gain is not taxable, a loss is not deductible.  However, there are exceptions.  For example, in the case where part of your home is rented or used exclusively for your business.

The following select depreciation provisions are retroactively extended by the Act (I have only included the credits most likely to be useful for small business owners).

• 15-year straight line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements;
• increased expensing limitations and treatment of certain real property as Section 179 property;
• The new law also extends and modifies the bonus depreciation provisions with respect to property placed in service after Dec. 31, 2012, in tax years ending after that date.

The following business credits and special rules are also extended (I have only included the credits most likely to be useful for small business owners).

• The research credit is modified and retroactively extended for two years through 2013.
• The employer wage credit for employees who are active duty members of the uniformed services is retroactively extended for two years through 2013.
• The work opportunity tax credit is retroactively extended for two years through 2013.
• Basis adjustment to stock of S corporations making charitable contributions of property in tax years beginning before Dec. 31, 2013.
• The reduction in S corporation recognition period for built-in gains tax is extended through 2013, with a 10-year period instead of a 5-year period.

Bartering is an exchange of property and services.  There can be a cash component.  Many people like bartering because they find it easier to deal with in terms of cash flow.    The fair value of the property and services received are included in income.  If you exchanged property or services through a barter exchange, a form 1099-B is issued to indicate the fair value amount received.  The property and services given up can be deducted if it is a qualifying business expense.  Bartering can become an administrative burden unless you always have equal value barter.  Also, many hope that income derived from barter does not need to be reported on their income tax return, but that would be false.  Personally, I do not like to barter.  It just means more busy work.

1. Charitable contributions must be made to “qualified organizations” as provided by IRS Publication 526. Remember, you can’t deduct donations to specific individuals or political organizations.

2. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.

3. You can deduct cash contributions and the fair market value of most property you donate. Clothing and household items must be in “good used condition or better” to be deductible.

4. If your contribution entitles you to receive merchandise, goods, or services, you can deduct the amount exceeding the fair market value of the benefit received.

5. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in May but paid the charity only $200 by year-end, you can only deduct $200.

6. Save a cancelled check, bank or credit card statement, or a dated / written receipt from the charity with the amount of the contribution. For text message donations, keep your phone bill showing the receiving organization, the date and the amount.

7. Include credit card charges and payments by check in the year you donate to the charity, even if you don’t pay the credit card bill or draft from your bank account until the next year.

8. For contributions of $250 or more, you need more than a bank record. You need a dated / written receipt from the charity. Stating the dollar amount donated and whether the organization provided goods or services in exchange for the gift. If you donated large items, the receipt must include a description of the items and a good faith estimate of value. For items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attach the form to your return. To claim deductions for a contributions of noncash property worth more than $5,000, you must obtain an appraisal and complete Section B of Form 8283 with your return.

Losses in an S-corporation can be used to reduce your adjusted gross income and thereby taxable income to the extent of shareholder basis.  From a shareholder basis perspective, many small business owners make the mistake of obtaining external loans to finance the business.  If the loan were made to the owner and the owner contributes the funds to the business in the form of paid-in-capital or loan from the owner to the business, the owner’s shareholder basis would be increased by this act thus increasing the likelihood that a loss may be used to reduce income for the owner on his/her personal income tax return.  Any suspended losses can be used when the owner again has shareholder basis.