JANE SCHNEIDER

As the holiday season begins to unfold, few of us want to start thinking about tax preparations, especially when the economic forecast is so gloomy. But for doctors, particularly those who own their medical practice, it's always wise to get a year-end update from a reputable CPA on the latest tax code changes.

Each year, new tax laws are passed that could mean real savings to you and your business. But some transactions must take place before the end of December 2008 in order to realize tax benefits for this year. Memphis Medical News spoke with certified public accountant Jason D. Whaley with Watkins Uiberall, PLLC, and certified financial planner Bill Howard, owner of William Howard and Co. Financial Advisors, to get a fix on the most significant tax news for healthcare professionals this year.

Here are seven tax tips worth considering:

• Harvest Loss When Managing Capital Gains Tax on Mutual Funds With the stock market's precipitous decline, mutual funds payout of capital gains and dividends will be impacted. Although your mutual fund shows a loss, you still may have taxable capital gain. The question is, how do you plan around that?

According to Bill Howard, it's important to determine the anticipated capital gain. If, for example, your funds show a capital gain of $5,000 yet the fund registered a loss, by selling some shares, you could shelter the gain, thereby saving up to $1,500. (This also applies to individual stocks.) What you want to do is take advantage of that loss by harvesting loss, and offsetting your capital gains. If you don't take advantage of the loss this year, it's gone forever. Take action before December 31st.

• Take a Depreciation on Fixed Assets Consider the types of purchases that have been made for your practice over the past calendar year. Whether your practice manager bought a new computer system, medical equipment or office furniture, appreciation can be claimed for each expenditure. However, the cost of those fixed assets cannot (generally speaking) be deducted in full in the year it was acquired.

Instead, according to Jason Whaley, "the cost must be capitalized and then depreciated over a number of years." What that figure is will be based on the asset. This year, however, a new tax law gives what's termed a "bonus depreciation." (This existed several years ago but was then struck from the Internal Revenue Code.)

For certain types of assets purchased in 2008 (including computers and medical equipment), "one-half of the cost of the asset can be deducted as bonus depreciation in 2008," said Whatley. "The remaining 50 percent is capitalized and depreciated under general depreciation rules. There is no limit on the amount of bonus depreciation deduction a taxpayer can take in 2008." In addition to the bonus depreciation, it's worth noting that a taxpayer can deduct "up to $250,000 in eligible purchases, as long as the total acquisitions do not exceed $800,000," according to Whaley. "For small- and mid-sized businesses with modest capital expenditure requirements, you'll be able to deduct, in full, the cost of 2008 fixed asset purchases."

• Extract the Cost of Your Building or Office Space As a Write OffThere are savings that can be harvested for professionals who own their building and have had it designed to specs specific to medical care. For example, medical offices may use specialized wiring to power equipment or require specific flooring to hold equipment. In other words, said Whaley, anything that is specific to the medical equipment used by your practice is eligible for write-off over a shorter length of time (i.e. five years versus 39 years). "That's a big deal in the medical business because there is lots of specialized wiring and lighting in the way a building comes together," he said.

You can extract your cost on a new building or one that you've been in for several years. "You can catch up and take a depreciation deduction," noted Whaley. The same applies if you lease your office space, provided you or your practice paid for the build-out. Therefore, the bottom line is straightforward, "You have to have fixed assets you're paying for," said Whaley.

• Consider a Cross-Tested Retirement Plan Cross-tested retirement plans give you the edge if you run a small- or mid-sized business, since you can tailor your employee retirement plan according to factors such as compensation level, number of years worked, and performance-based service. Each employee has his own tier based on these factors. "As a business owner, the employer can allow higher compensated employees to defer a higher percentage of pay," said Whaley. "Cross-testing may allow the doctor/owner to get the biggest bang for his buck."

• Double Up on Itemized Deductions If your real estate tax comes due in June, pay it in December, said Howard, and use it as an itemized deduction for 2008. By doubling up on your contribution in the same tax year, you'll save on your tax bill. This can be done every other year.

• Offset Stock Loss with Charitable Giving Donate cash versus stock to the charity of your choice. If your stock has taken a hit, it makes more financial sense to sell the stock and give those earnings to charity said Howard. If you sell your stock at a loss, you can then deduct this from your overall capital gains tax.

• Avoid Paying Gift Tax with Grantor Retained Annuity Trust If you want to leave a financial gift to family members and think your investment will increase in value over time, create a Grantor Retained Annuity Trust (GRAT) and avoid paying U.S. gift tax. As the grantor, you receive payment from the annuity over a three or five year period. When that window closes, any remaining funds in the trust are paid to the beneficiary and no gift tax is incurred.

Be sure to speak with a reputable CPA or certified financial planner and determine the tax planning strategies that best fit your financial situation.