12 results for tag: Tax Deductions

Should You Convert Your Personal Vehicle to Business Use?

Remember Mel Practess, the attorney you met last month who came out ahead by using his wife’s car for business? Once Mel and Sharpe, his wife, started using both cars, they had 73.7 percent business use of each car. Before their agreement to switch cars every week, Mel drove one car and achieved 93.3 percent business use. If you are single and have two or more vehicles, you likely come out ahead by using all vehicles for business. Why? Let’s look at an example. Jim has three cars with the following basis for depreciation: $50,000 for vehicle 1 $33,000 for vehicle 2 $27,000 for vehicle 3 If Jim drives only vehicle 1 for business, ...

Understanding Tax Deductions for Charitable Clothing Donations: The Case of Duncan Bass

Tax-related issues can be complex and challenging, especially when it comes to charitable donations. In this article I explore the tax-related problems faced by Duncan Bass, an individual with multiple jobs and businesses, who made substantial donations of clothing to Goodwill and the Salvation Army. By taking a look at Mr. Bass's predicament, our objective lies in delineating the core tenets and fundamental facets of tax deductions for charitable clothing donations, highlighting the importance of adhering to IRS rules and regulations. Duncan Bass's Diverse Work and Philanthropic Endeavors Duncan Bass exemplified a diligent work ethic, balancing ...

Discover the Hidden Potential of Business Meals: Maximizing Your Tax Benefits

If you go to a Dutch-treat lunch with a colleague or have a member lunch at your monthly chamber of commerce meeting, you face two opposing tax laws: The law that denies your deductions for personal living expenses (food) The law that allows business meals as tax deductions Tax professionals know this conflict as the “Sutter rule,” named after Dr. Sutter, who had a bad experience with the Tax Court. When the IRS and/or the courts invoke the Sutter rule, you lose your business meal deductions to the extent they don’t exceed your personal meal costs. Example: Your Dutch-treat meal deductions for business entertainment for the year are ...

Maximize Your Business Deductions: The Power of Accurate Mileage Tracking

Know This You can spend a lot more time with the IRS when you present an inadequate log of your business mileage. You can spend excessive time re-creating a mileage log that looks really good but will fail. The tax code forbids the IRS from giving you vehicle deductions when you fail to keep adequate records of your business mileage. The tax code forbids the courts from giving you vehicle deductions when you can’t prove your mileage. If you fail to keep a mileage log or other record that proves your business mileage and the IRS catches up with you, you will deduct less than your real business mileage and you might end up with no ...

Don’t Expose Yourself with Improper Use of the $75 Rule

When the $75 rule applies, you don’t need a receipt. The problem with this rule is that it is often thought to apply to all tax deductions. That’s wrong. Now, think of the taxpayers who incorrectly apply the $75 rule to all of their tax deductions. They are exposed to a massive loss of deductions and likely some penalties too. The $75 Rule IRS Reg. Section 1.274-5(c)(2)(iii) contains the $75 rule.1 Notice 95-50 contains a clear explanation of what the $75 rule applies to.2 Here’s how it works: You don’t need a receipt for business travel expenses that are less than $75, with two exceptions: (1) you always need a receipt for ...

2022 Last-Minute Year-End General Business Income Tax Deductions

The purpose of this article is to get the IRS to owe you money. Of course, the IRS will not likely cut you a check for this money—although, in the right circumstances, that will happen. But in most cases, youʼll probably realize the cash when you pay less in taxes. This article gives you six powerful business tax deduction strategies you can easily understand and implement before the end of 2022. 1. Prepay Expenses Using the IRS Safe Harbor You have to thank the IRS for its tax-deduction safe harbors. IRS regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 ...

How Will You Deal with the New 62.5 Cents Mileage Rate?

Well, the IRS woke up and noticed that average gas prices across the United States now exceeded $5.00 a gallon and took action that might help you a bit. Small businesses that qualify to use and do use the standard mileage rate can deduct 62.5 cents per business mile from July 1 through December 31, 2022. That’s an increase of 4 cents a mile. This brings up a practical question: What to do if you track business mileage using the three-month sample method? Three-Month Sample Basics As a reminder, here are the basics of how the IRS describes the three-month test: The taxpayer uses her vehicle for business use. She and other ...

Increase Your Tax Deductions Using the Business-Mileage Rule

Request Please clarify how to properly record commuting mileage, especially if you do other trips before and after stopping at your regular office. Response To record commuting mileage, you simply write in your appointment calendar (or other daily record or digital app): home to office, 10 miles, commute. Ugh! We Don’t Like That We absolutely, positively don’t like commuting mileage. You should dislike it, too. It’s personal. It’s not deductible. But with knowledge, it’s avoidable. Let’s eliminate commuting and make those trips from your home to your office deductible. The law gives you two ways to eliminate ...

SEP-IRA vs Solo 401(k): Which Should You Choose?

Parts of this article are published with permission from Bradford Tax Institute, © 2022 Daniel Morris, Morris + D’Angelo One way to multiply your net worth is to let the government help. Hereʼs How: With both the SEP IRA and the solo 401(k) retirement plans, your investment in your tax-favored retirement Creates tax deductions for the money you invest in the plan, Grows tax-deferred inside the plan, and Suffers taxes only when you take the money from the plan. Example: You invest $1,000 a month in your retirement. You are in the 40 percent tax bracket (combined federal and state), and you earn 10 percent on your investments. At the ...