Archive for April, 2010
Paperless Payroll Can Save Money
Apr 26th
Everyone seems to be trying to go “green” these days, which is a good thing. Going paperless with your company’s payroll can help with the “going green” issue today. It can also save you money. Pay-Perks has developed a Paperless Payroll Calculator in connection with the American Payroll Association to show small businesses how much they can save by going paperless with their payroll.
It has been estimated the average company can save approximately $75 per employee per year going paperless. This sounds like a great idea and one you might want to consider.
A Win-Win Tax Break: Buying Company Assets and Leasing Them Back to the Company
Apr 12th
Owners of a C corporation are sometimes hit with a double tax whammy. The corporation pays tax and the owner is taxed personally on dividends received from the company.
One potential tax break for both is to have the owner buy property and assets personally and then lease them to the company. By doing this, the owner is paid deductible lease payments instead of nondeductible dividends. The business owner’s income is offset with depreciation or amortization deductions.
The company benefits by gaining cash it may need for expansion. In addition, the business can deduct rental payments. Money paid to the owner in dividends is not deductible for the business.
There are five basic requirements for such a deal to satisfy the IRS that the transaction is legal.
Source: Small Business Strategies, March 2010
A Win-Win Tax Break: Buy Your Parents’ Home and Rent It Back
Apr 5th
Do you have older parents living in a house that has appreciated in value and who can no longer reap the tax breaks of homeownership? Consider buying their house and renting it back to them. All of you will benefit.
If your parents’ mortgage is paid off or if they are only making payments on principal, their tax bracket might be so low the mortgage interest deduction doesn’t matter. Chances are they don’t have enough deductions to beat the standard deduction amount and don’t itemize. Mortgage interest paid then is of no tax savings value to them.
In this situation, you and your parents will benefit from a sale/leaseback. By selling their home to you, your parents will gain cash without needing to refinance their home or get a home equity loan. And, by your leasing the house back to them, they don’t have to move. You, as the buyer and landlord, gain the tax benefits of owning rental property.
Make sure you pay a fair price for the house and support that price with a qualified and independent appraisal in order to avoid any gift-tax complications.
A word of warning: You can reduce the fair-market rent by 20% when renting to relatives. If you set the rent too low, the IRS can claim the rental home is for your personal use and limit the deductions as if the property were a vacation home.
Source: Small Business Tax Strategies, March 2010
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