For businesses
Expense property under section 179
For 2011, the Sec. 179 deduction has increased to $500,000 (previously $250,000) and the threshold to begin phasing out the deduction has increased to $2 million (previously $800,000) of asset additions with the fully phased out amount now at $2.5 million. For the first time, qualified real property placed in service in 2011 is eligible for up to $250,000 of Sec. 179 expensing. Qualified real property includes qualified leasehold improvements, qualified retail property, and qualified restaurant property.

Bonus depreciation
A 100% bonus depreciation deduction (previously 50%) is available for qualified new property placed in service during 2011 and certain long-term construction property placed in service before January 1, 2013. This applies to businesses of all sizes and bonus depreciation is not subject to the Sec. 179 limitations. In 2012, bonus depreciation reverts back to 50%. Bonus depreciation is currently set to be eliminated beginning January 1, 2013.

Take advantage of the S Corporation built-in gains tax relief
Typically, when a C corporation converts to an S corporation, if any appreciated C corporation assets are disposed of within ten years following the conversion, the tax law imposes a tax on the portion of the appreciation that occurred during the "C" years at the highest corporate rate (35%). The usual ten-year holding period was shortened to seven years for dispositions in 2009 and 2010. For dispositions in 2011, the holding period has been further shortened to five years. Accordingly, the recognition period ends at the beginning of the 2011 tax year if the S corporation election was made for the 2006 tax year. This provision applies only to tax years beginning in 2011 unless it is extended by Congress.

For individuals
Utilize losses from pass-through entities
A shareholder loan made directly to an S corporation will provide basis to enable you to utilize losses. Shareholder/Partner loans should be arms-length transactions and documented. Generally, loan transactions should be consistent with the written documents to minimize the potential that the loan is re-characterized as equity by the IRS. In situations where the basis in the loan has been used to deduct losses, the repayment of the loan may create taxable income.

Avoid limitations on passive losses
Individual taxpayers are allowed to group business and rental activities on their tax returns to meet various passive activity loss allowance rules. Many taxpayers have taken advantage of these grouping provisions without formally advising the IRS of their grouping method. The IRS finalized the requirements for reporting and disclosure of activity groupings and regroupings for purposes of the passive activity rules. The new reporting requirements are effective for tax years beginning on or after January 25, 2010 which means that for most taxpayers, the new rules will be effective for the 2011 tax returns. If activity groupings are not disclosed, and the IRS discovers a failure to disclose, the IRS may separate and/or regroup those activities even if the groupings are appropriate.

Take advantage of the temporary suspension of overall itemized deduction limitation
Since the 1990s, there has been a limitation on total itemized deductions for taxpayers whose AGI exceeded a certain annually adjusted amount. For the 2011 tax year the overall itemized deduction limitation has been lifted. This is not to be confused with the 7.5 percent and 2 percent AGI floors for medical expenses and miscellaneous itemized deductions respectively, which still exist.