Posts tagged deductions
Six Tax-Efficient Ways to Pay for Back to School Items
Aug 30th
Students going back to school can utilize a variety of tax-favored ways to pay for college tuition, books, supplies, and computers. Here’s six ideas for paying for school expenses that have varying degrees of tax efficiency:
1. Take cash out of a 529 College Savings Plan. Distributions from a 529 plan are tax-free as long as the funds are used to pay for tuition, room and board, books, supplies, and computer equipment and software.
To read the rest of this article by William Perez, please go to http://bit.ly/aSiUuj.
Ten Tips for Taxpayers Making Charitable Donations
Aug 26th
IRS Summertime Tax Tip 2010-21 http://bit.ly/aVjA6r
Did you make a donation to a charity this year? If so, you may be able to take a deduction for it on your 2010 tax return.
Here are the top 10 things the IRS wants every taxpayer to know before deducting charitable donations.
- Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.
- Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
- You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
- If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
- Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the name of the organization, or a payroll deduction record.
- Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.
- Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
- For any contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash and a description and good faith estimate of value of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.
- To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.
- An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.
For more information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Links:
- Publication 78, Cumulative List of Organizations
- Publication 526, Charitable Contributions ( PDF)
- Publication 561, Determining the Value of Donated Property ( PDF)
Back to School for Boss? Tax Breaks Can Help
Aug 5th
If you’re a small-business owner seeking more training for yourself or for your staff, now is the time to enroll for the fall term. Fortunately, Uncle Sam helps defray the costs of education by providing important tax breaks.
Owners’ Education
Successful business owners often pursue higher education or take courses in sales, software or other specialized learning programs. What’s the best way to write-off the cost of education that the owner pays for personally? It depends on several factors, including the type of education, the entity used by the business (such as a sole proprietorship or C corporation) and the owner’s personal tax picture. Here’s a short list.
To read the rest of Barbara Weltman’s article, please go to http://bit.ly/a1t5r9.
Tax for Truckers
Aug 3rd
If you are a trucker, check out this article by Bruce, aka “taxguy,” at http://bit.ly/cZACwg. He has been part of the truck-diving industry for 22 years. He covers the following topics, which could be important toward your taxes:
- Keep Immaculate Records
- Track the Little Things
- Meal Allowances
- Travel Expenses
- Lumpers
- Truck Weight
- Fuel Taxes
Hire Your Kids, Cut Your Taxes
Jul 30th
The keys to success:
- Your business is not incorporated.
- You hire your children to work for you in your business.
- You pay them reasonable wages.
If you do those three things, you can deduct their wages from your income and shift the money to your children who will be in much-lower tax brackets.
Here’s how my three-step hiring process works:
To read the rest of this article by Jeff Schnepper, MSN Money, please go to http://bit.ly/b2SJkr.
Financial Benefits of Decluttering
Jul 23rd
I have been in a decluttering mode lately. It was sparked by moving my mom from her three-bedroom home to a one-bedroom apartment in my house — and having to pare down her belongings. Spending weeks going through all her stuff to figure out what she did and didn’t need (then selling and donating the unneccesary items) made me want to remove all the clutter from my life, too. A few articles I recently read fueled this desire even more.
My husband and I usually go through our closet once a year to clear out clothes we no longer wear. But an article in the New York Times about people who decided to wear only six items for a month made me aware that there still is a lot in my closet that I don’t need.
We occasionally go through other closets, cabinets and drawers to rid them of items that don’t get used and just take up space. After reading G.E. Miller’s 3 Guerilla Tactics to Get Rid of Clutter on 20somethingfinance, I realized my haphazard keep-or-toss tactics weren’t cutting it.
What resonated with me most, though, was a reader comment on the Opinionator blog post How to Lose a Legacy. The reader wrote about cleaning out his (or her) parents’ home after his mother died and father moved out: “I wonder why we (me) hang on to stuff that really just takes up physical and emotional “room” in our lives; I s’pose it’s because the “stuff” (as George Carlin so aptly and comically put it) signifies a longing to hang on to, or dare I say, cling, to memories using physical things … even if we actually wish we could just throw a lot of it in the trash.”
It feels good to get rid of the clutter. This is a personal finance column, so I won’t advocate just throwing your stuff in the trash because you’d miss out on the financial benefits of decluttering. Here’s what getting rid of things you don’t need can do for your finances:
To read the rest of this article by Cameron Huddleston, Contributing Editor to Kiplinger.com, please go to http://bit.ly/aHXTs8
Keeping Good Records Reduces Stress at Tax Time
Jul 7th
A new video on the Small Business section of the IRS Video Portal looks at how good recordkeeping can reduce stress at tax time. Check it out here: http://bit.ly/cQ2qFP
Limitations on Home Mortgage Interest Deductions
Jul 6th
The IRS reminds taxpayers that interest deductions on home mortgages are limited, including limitations for home acquisition and home equity indebtedness.
There is one limit for loans used to buy, build, or substantially improve a residence — called home acquisition debt. There is another limit for loans secured by a qualified residence but used for other purposes — called home equity debt. Internal Revenue Code Section 163(h) (3) provides guidance for the limitations on the home mortgage interest deduction.
The law allows taxpayers to deduct interest on two categories of indebtedness secured by their residences. Acquisition indebtedness is used to acquire, construct, or substantially improve a residence, and cannot exceed $1,000,000. Home equity indebtedness is any debt other than acquisition indebtedness and cannot exceed $100,000.
To read the rest of the article, please go to http://bit.ly/bZr9WU.
Paying Your Attorney: What’s Tax Deductible
Jul 6th
Small businesses use legal services for a variety of reasons, and the fees for these services can be hefty.
Small businesses, for example, are particularly vulnerable to frivolous lawsuits designed essentially to extort a settlement (a few years ago more than one-third reported that they had have been sued) and they incur substantial legal fees in these actions.
Unfortunately, not all legal fees are immediately tax deductible. The tax treatment of legal fees usually depends on what you incur them for.
For the rest of the article, please go to http://bit.ly/9tilF1.
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
