Three Things Your CPA Can Help You Deduct at the End of the Year
Tax Deductions
Tax season can be a very stressful time for both business owner and non-business owners. And one of most stressful things about tax season is the anxiety surrounding the deductions you may be able to claim. Here are four things your CPA can help you deduct from your taxes:
Health Insurance Premiums
Medical expenses have the potential to literally blow your bank account, and believe it or not, the IRS has compassion on American citizens as it relates to health insurance. In order to deduct medical expenses, health insurance premiums have to be more than ten percent of your adjusted gross income.
Charitable Gifts
Practically every taxpayer knows that making charitable gifts or donations can yield big rewards at the end of each year. Sadly, that’s why many taxpayers give as much as they do. While most taxpayers know about this benefit, it has been proven time and time again that many taxpayers actually aren’t taking full advantage of this benefit.
For example, money isn’t the only thing that can be deducted. If you make a donation of clothing to the Goodwill, or even if you bake cupcakes for a local charity, the monetary value of your clothes and also the monetary value of the ingredients for the cupcakes can both be deducted.
Babysitter
Have you recently had to pay for a babysitter so that you could go volunteer for a charity? There’s good news! Thanks to a law passed by the federal Tax Court, you can actually include the cost of your babysitter as a charitable contribution. All you have to do is document or prove that your babysitter was working at your home while you were volunteering.
What ways have you been able to deduct from you taxes thanks to your CPA? Leave your comments below.
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Five Deductions Your CPA Can Help You Obtain
Deductions
Filing our taxes can easily be the most exciting, and the most stressful, thing you do all year long. Filing taxes can be fun when you know a refund awaits you on the other side; but it can also be stressful during those times you know you owe thousands in back taxes.
For these two reasons alone, many people refuse to rely on their own expertise and instead opt to hire a CPA. A CPA (which stands for Certified Public Accountant) is equipped with the tools necessary to make sure that you not only file your taxes correctly but that you are getting the tax deductions for which you qualify.
Below are five deductions your CPA can help you obtain:
Charity
Did you donate to charity this year? Did you take a large amount of clothing to the Goodwill? Great news! Your CPA can help you deduct those items from your taxes. Who would’ve ever guessed that your giving heart would get you a tax write-off!
Self-Employed
Are you a business owner? Do you complete freelance work on a consistent basis? You’re in luck. Your status can make you eligible for the self-employed taxes. Your CPA can help you determine what items related to your business can be deducted.
Internet
Believe it or not, a good CPA has the ability to help you deduct internet expenses from your taxes if you use the internet to complete your work for a company that hasn’t paid for the computer you use.
Meals & Entertainment
Are you a business owner who regularly entertains your clients or partners over drinks or a meal? As long as these costs are clearly for business purposes, be sure to keep record of time, place and receipts, and at the end of the year your CPA can help you deduct these costs.
Telephone Charges
Are you constantly plagued with high cell or telephone bills thanks to client calls? Telephone charges are a little known tax deduction that could save your business thousands of dollars at the end of the year.
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Harvest a Break: Tax Deductions and Growing Your Own Food
Farming & Taxes
Growing your own food can be both financially and personally rewarding: not only can you provide food for your local community, but you could conceivably become self-sustaining. In addition, you can also deduct quite a bit of your operating costs from your tax liability. Before you start tilling, check the tips below to help maximize your deduction and start harvesting tax return dollars.
Profitable farms only
First and foremost you most prove to the IRS that you intend to generate a profit from what you reap: hobby farms or self-subsistence farms do not qualify. This doesn’t mean you have to immediately start turning a profit: you can claim deductions for business costs as you work to get established. For example, if you spent money on livestock, tools, manure, and so on, you can deduct those costs from your tax liability so long as they are pertinent to your farm business. The easiest way to do so is to maintain meticulous records of transactions. Do note, however, that if you don’t turn a profit for a least three out of five years the IRS may assert that your farm is a hobby and not a business.
It’s not just for food
The tax deduction is not just for food: you can claim the deduction to raise horses, cattle, bees, poultry, and even to produce building material for goods such as crafts or furniture. The same rules apply: you have to work to turn a profit and be able to demonstrate to the IRS that you intend to do so.
That also includes depreciation
Running a farm is no easy task, and accordingly you are likely to have lots of tools or machinery to help you out. Good news: major tools can be depreciated, and small tools are fully deductible. Again, you must have accurate records for the IRS to claim these deductions.
Not all states are the same
While all 50 states offer preferential tax rates to agricultural land, ease of claiming this break varies from state to state. Make sure you’re playing by the rules, obtaining any required permits and complying with zoning laws, and you should be able to reap the benefits on your return.
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4 Deductions Self-Employed Professionals Should Utilize
Being self-employed can often feel like having two jobs rolled into one: not only do you have your work or service you provide, but you often have to solicit new business, do your own marketing, bookkeeping, expense tracking and so on. Although you’d likely be best served by a CPA, here are a few deductions to help maximize your tax return.
Tax Deductions
Business travel costs
Track everything when you travel for work! This includes gas, meals, lodging, airfare, train tickets, even regular maintenance on a work vehicle. Remember that any non-business activities along the route cannot be deducted as a business expense. That means if you take a detour to see your parents on the way to a business conference, you cannot deduct any expenses incurred related to your detour.
Social security taxes
You can write off half of what you pay in social security taxes. This is only applicable if you’re self-employed and thus are paying the full 15.3% tax by yourself, instead of splitting the cost with an employer.
The home office deduction
Your business may have an office or facility, but odds are if you’re self-employed you do at least some work at home. While no one really enjoys bringing their work home, the good news is that if you have a dedicated business work space in your home, you can deduct that from your tax liability. This includes part of your rent, any associated utilities (e.g., your internet service fee), or you can use the simplified method: deduct $5 for every square foot that qualifies for the deduction.
Health insurance premiums
If you’re self-employed you can deduct medical insurance premiums for yourself and your family. Further this applies whether or not you itemize your deductions, but you’re automatically disqualified for the deduction if you are eligible for employer-sponsored health insurance through another job.
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Working From Home: Taxes in the Home Office
Home Office
If you often or exclusively work from home, you have likely carved out a productive space for your work. Although there are some specific criteria you have to satisfy, you may be able to write off some of your operating expenses for that home office.
Here are a few things you should know:
Size doesn’t matter
There’s no size requirement. Your designated space can literally be a desk, or it can be an entire portion of your home. So long as the space is distinct, identifiable, and used exclusively for business.
Exclusive doesn’t mean completely exclusive
If you frequently work from the dining room table, or the couch from which you normally watch TV, you cannot claim that space for the deduction. The space you claim must be specifically used for business purposes.
Business storage and daycares have a different set of criteria
If you operate a daycare or use your home to store goods for your business, you can ignore the previous point. Storage space has to be used only for product that you intend to sell, and your home has to be the only “fixed location” of your business. So if you’re just storing some extra business equipment or stock, your home space doesn’t qualify.
Employees can also deduct home office expenses
You can only qualify for this deduction if the office exists for your employer’s convenience. An office remodel or lack of space at the usual office location would apply in this instance. However, if you’re renting out the space to your employer, you cannot claim the deduction.
If you work in multiple locations you can still claim the deduction
You can only claim the home office deduction if your home is where you do the majority of your work, or your home office is where you perform specific tasks that are a necessary function of your job. If you use a part of your home exclusively and regularly to meet with clients, customers, or patients, it does qualify for the deduction
Even if it is not your primary place of business, you can still claim the deduction. However, just because you take the occasional phone call or meeting in the space does not mean it qualifies; you have to be conducting regular in-person meetings. There’s also a partial deduction in the event that you only meet the criteria for part of the year.
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Moving On Up: Tips to Maximize Your Tax Credits
Moving Day
No one really likes moving: it’s costly, stressful, and generally a pain in the butt–and usually the lower back at the same time. But there’s a small light at the end of that tunnel: there are some tax benefits available to movers. Two things worth noting: the following presupposes that you’re moving for a new job; costs incurred for moving within the same town do not qualify for a deduction.
There are a few requirements which must be met:
Distance Requirements
The distance between your new job and your former home must be at least 50 miles farther than your previous employer is from that home. The IRS requires you to use the shortest commutable routes between two locations to judge this distance.
Time Requirements
You must work full-time for a minimum of 39 weeks during your initial 12 months, which starts on the day you arrive at your new location. If the 39 weeks are not consecutive you can still satisfy this requirement, whether it’s for one or multiple employers.
Okay, I Qualify: So What Is Deductible?
You may deduct any reasonable expense that you incur during the transport of your personal and household items to the new home.
This includes the cost of renting a storage unit (up to 30 days) if you are unable to immediately move your stuff into the new space. If you drive your personal vehicle, you are also able to include gas, oil, parking fees, and any road tolls. If you’re moving a long distance, you can deduct airfare, train tickets, or bus fare.
Claiming the Moving Expenses Deduction
Because of the required 12-month period, most taxpayers are unable to satisfy the time requirements until the following tax year. However, the IRS permits you to claim the deduction in the year you move. Should you not satisfy all requirements at the end of the 12-month period, you must reverse the deduction.
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Essential Facts About Taxes and Natural Disasters
Taxes and Natural Disasters
We extend our condolences to anyone who has experienced the wrath of a natural disaster. Although perhaps not quite a silver lining, it’s worth knowing that if you suffer damage to your home or personal property, you may be able to deduct losses based on the damage incurred during a disaster. Such disasters may include earthquakes, floods, hurricanes, and tornadoes, but can also include losses from accidents, fires, thefts and vandalism. The following rules apply to personal-use property; different rules apply to business or income property.
If your property is insured, you are required to file a timely claim for reimbursement. If you do not, you are unable to deduct the loss as a casualty. You are generally required to deduct a casualty loss the year it occurred. However if your loss was in a federally declared disaster area, you may have a choice when you deduct the loss, i.e. in the form of an amended tax return from the preceding year.
There are a few rules that must be applied to casualty losses:
$100 rule: once you have calculated your casualty loss on personal property, you must reduce that loss by $100. Apply this reduction to each casualty loss event during the year, regardless of how many pieces of property are involved in the loss.
10% rule: reduce the total of all your casualty losses on personal property for the year by 10% of your adjusted gross income.
You cannot claim casualty losses from normal wear and tear, including progressive deterioration or pest damage.
You are also not able to claim future losses for projected future profits.
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Three Business Tax Tips for Home Business Owners
Running a business out of your home allows you to have access to a variety of tax advantages. It’s important to discover just what opportunities fit best with your lifestyle. Using tax write offs and deductions will help you save money on your return.
Stay Organized!
The biggest thing you can do to prepare for the next tax season is to stay organized and keep good records. This will help immensely when it comes to writing off deductibles or reporting income. After you report profit to the IRS, they may request for additional information.
Deducting Home Office Space
In order to deduct a percentage of your home space, there must be a dedicated area used exclusively for business activities; you cannot have another fixed location outside of the home where you regularly conduct business activities. Any rent, utilities, repairs, or home improvements may have a percentage written off on them depending on the space’s contribution.
Track Car Mileage
If you are using your vehicle to complete local deliveries, collect supplies, or attend conferences and meetings you may be eligible to write off your car mileage as a deductible. Keep track of the yearly miles you put on the vehicle for business adventures instead of taking the standard mileage allowance to get the full benefit of the write-off.
Conclusion
Having a business out of your home can be very advantageous to your career. Be sure to use these tax tips to your benefit during the next season. Missing out on the opportunities is comparable to throwing away money.
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The ABCs of Determining the Square Footage of Your Home Office for Tax Purposes
Small business owners, who have a designated office space in which to operate their business, are eligible to claim a portion of the mortgage and other home expenses on their taxes. However, you can only claim this deduction if you know the square footage of your home which is designated as your office space.
How to Determine Your Home Office Square Footage
In order to determine the percentage you can deduct from your mortgage and other home expenses, simply divide the square footage of your home office space against the total square footage of your home. If your office space is 135 square feet, and your house is 1,400 square feet, this means that you can deduct a total of 9% of the cost of your mortgage and utilities. Using this simplified equation is the best way to get an accurate sense of your percentage.
If the room you use for your home office is identical in size to your other rooms, you can use another method to determine your percentage. Simply divide the number of rooms you use for your business by the total amount of rooms in your house.
Currently, the IRS allows $5 per square foot. However, be aware that you can only claim up to 300 square feet of your home for this purpose.
Home Office Advantage
Qualifying for this deduction can be well worth it as the payoff is significant. However, you cannot use the home office for any other purpose.
If you are thinking about the home office space deduction, please consider it carefully.
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