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Tax Deduction 101 for Home Based Businesses

Oct 29

Posted by admin in Taxes

Seeking tax advice and tax tips is never a bad idea. When it is time to file your home based businesses taxes online you want to have every weapon that is legally at your disposal. Having a list of acceptable deductions for your home business will allow you to quickly and legitimately flow through the tax season with little to no hiccups. Here are a few things to think about when beginning to file taxes online.

First, do you have a home office in the same way the IRS sees a home office? Is your home business run in one designated room in your home or are you working from the computer in your family room? If it is the later it is not considered a home office by the IRS. The room you run your business from must have no other use except working. If you do run your business from a singular room then the square footage of that room can represent the percentage of your mortgage or rent that can be deducted from your taxes. Also, the utilities that you use in your business ventures such as electricity and internet can be deducted. Typically a percentage of the total cost is deducted.

Second, what office supplies do you purchase? Even if you are not able to use the home office deduction, you can still deduct the office supplies that you purchase. Keeping well organized receipts will help you know what you can deduct and what you can not.

The third type of deduction is for office furniture. You have two choices when it comes to this deduction. One, you can deduct 100% of the cost of the furniture for that year. For that deduction, you would fill out the Section 179 deduction sheet in your tax form. In 2006, you could claim $108,000 in expenditures. If you don’t wish to claim the entire cost of your furniture that year you also have the option of depreciation, which allows you to deduct a part of the cost over a seven year period.

The other equipment such as computers, scanners, and fax machines can be deducted under the same principles as the office furniture. You would use the same Section 179 sheet to deduct these things. Any software or subscriptions used by your business can be deducted in the same way.

You can deduct any traveling you might do for your business but remember to keep accurate data of the trip mileage, tolls, or any other trip orientated expenses which includes your lodging and meal expenses. Only 50% of your meal expenses can be deducted. The IRS is a stickler for documentation, so have it readily available. You will also need to check what the gas rate was for the tax year in question and make the appropriate calculation. If you have purchased a vehicle, that too can be deducted. Just make sure to calculate the interest and depreciation for the vehicle.

There are several other deductions that you can find for a home based business. However, it is important that you make sure you follow the guidelines set forth by the IRS and they maintain documentation for everything that you are claiming.

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Child Care Tax Deduction 101

Oct 29

Posted by admin in Taxes

For parents of children 12 and under, the child care tax deduction can be a life saver to working parents. Parents should become familiar with the tax information regarding the child care tax deduction. If they aren’t sure what to do, there are many tax professionals which can offer tax advice on how to claim this deduction. All of this can help them when it comes time to file taxes online.

The first thing a parent has to know is the criteria for the child care deduction. The criteria are as follows:

The child must be 12 years old or younger. If the child is 13 or older, you must show that the child is either physically and/or mentally unable to care for themselves. If the child is 13 and up and is mentally or physically disabled, you may also deduct adult daycare expenses.

‘-You must provide a home for the child or adult dependent by paying over half the expenses for the maintenance of the home for the dependent. You can not deduct child care or dependent care for a person that does not live with you. The childcare provider you employ can not be another dependent. This means that if your older children watch your younger children, this can be not be used for the child care deduction unless they are 19 years old or over and no longer qualify as a dependent.

Your child care provider has to give you their name or business name if there is one, an address, and a Social Security or Employer Identification Number. This information will be reported on your 2441 form so that you can claim the Child and Dependent Care Tax Credit.

Parents have other deductions that they can claim on their taxes online or on paper. There is the Child Tax Credit, which can be up to $1,000 per qualified child. A child qualifies if the child’s living expenses are paid by the parent for more then one half of the year and the child is not being claimed by anyone else. The child must also be 16 or younger by the end of the year to qualify as a dependent.

Another deduction for parents is the Earned Income Tax Credit. It was designed to help lower income families with their day to day expenses. If you need tax advice on how to claim this credit, you can check out the IRS website or contact a tax professional.

Checking yearly for changes in tax laws is always a good thing to start with, as there may be new deductions to help struggling families with their taxes.

Many people opt to buy tax preparation software to help them file their taxes. The programs walk the taxpayer through the filing process, asking them questions and using their answers to determine what they qualify for. If you are unfamiliar with how best to fill out your taxes, it might be worth buying one of these programs. They typically come with an option that all you to file taxes online right through the program. This can make the tax process much easier and can provide the taxpayer with additional savings.

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Why Would You Want To Use Tax Deduction Software?

Mar 23

Posted by admin in Finance

With all the options in tax deduction software it is hard to distinguish which ones are offering the best deals. A lot software is web-based, but there are still a few that can be loaded onto your personal computer. Let’s take a look at a few the most common ones.

A few good software tools that are popular include Turbo Tax Premier and Complete Tax. These two are best for those who have complicated tax returns. For example those who run their own business, rent properties, or have invested in stocks or partnerships may find they have better luck with these two examples of tax deduction software. For further information regarding these two software programs you should know that both are web-based, but Turbo Tax also has a version for your personal computer. Turbo Tax also happens to be the best one for those who have rental income. For those who happen to be very active investors the best software is Complete Tax, which is compatible with Gainskeeper.

If you have a pretty easy tax return the best tax deduction software for your needs seems to be Tax Act. This includes those who have any interest from banks or dividends or mutual funds and also receive W-2’s from a job. When use Tax Act as your software you can easily calculate your returns but also see any penalties you might incur. Tax Act online charges $7.95 for each return, including state and federal taxes. Another good tax deduction software that may be good for more straightforward needs is Snap Tax. Both of these can be e-filed.

Because of some unique situations in terms of filing taxes it is not possible to have a software program that can fully handle all situations. In these situations it is probably best to hire a professional. However Turbo Tax Premier is as close to ideal in these situations, even though you still have to rely on your own judgment some.

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What Is A Standard Tax Deduction?

Mar 22

Posted by admin in Taxes

One thing you can always count on is the standard tax deduction. This deduction is one almost everyone can take advantage of it is an amount that is taxable as a flat amount. Those who may not be able to take advantage of the tax reduction are those who may benefit more by an itemized tax deduction. Because of laws you can only do one or the other, not both. Those who go with itemized deductions can take advantage of medical expenses, charity and such while those who go with the reduction cannot.

Commonly the brackets for the standard tax deduction are updated every year, so the maximum advantage can be taken, that reflects current inflation. But the deduction that actually gets taken into consideration can vary with the filing status of each individual taxpayer. This means that the tax reduction can vary depending on if you are married filing single or jointly or as single head of household. It can vary by several thousand dollars, so you should take into consideration how you file very carefully if you are going to go with the standard tax deduction.

Those who are considered senior citizens, age 65 or older, have additional advantages when it comes to the reduction. For these individuals they are allowed a higher deduction. This higher deduction can also apply to those people who are legally blind. Yet another group of people who claim this higher deduction in the standard deduction are spouses of the blind or individual who is 65 or older.

One thing you should also consider in a tax rebate is if you are part of someone else claim to a deduction. If you are you cannot claim as high a deduction on your own reduction. Those who are students can claim scholarships and grants as part of their deduction under the heading of income.

The standard tax deduction is also not available to those whose spouse itemizes their deductions. It is also not something available to those who may file a tax return for a short tax year or to those who may be a non-resident or dual-status alien. The only exception is if the non-resident alien is married to a United States citizen.

Because the deduction is simpler and more straightforward it is something a lot of people choose to use. If you are someone who is itemized but can easily qualify you may want to take a second look at the standard reduction instead, it could be well worth it.

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Don\’t Forget About These Frequently Overlooked Tax Deductions

Jul 29

Posted by admin in Taxes

When an individual files their tax returns each year they are able to claim a number of tax deductions. Many times a tax deduction can reduce the amount of money that is owed to the Internal Revenue Service (IRS) or it can create a larger tax refund. The most commonly used tax deduction is the standard tax deduction; however, there are number of other tax deductions that many individuals fail to claim or even consider. Frequently overlooked tax deductions can prevent a taxpayer from getting additional money that they deserve.

Claiming a number of tax deductions often requires receipts or other documentation. For this reason there are many individuals who may be unable to claim some of these frequently overlooked tax deductions on this years tax return. To prevent yourself from losing even more money next year taxpayers are encouraged to spend the whole year preparing for tax season and tax deductions.

One of the most frequently overlooked tax deductions is that of medical expenses. To claim a medical expense deduction the medical expenses must be at least seven and half percent of a taxpayers income. While this may seem like a large amount of money there are some individuals who will definitely qualify for this tax deduction. Families with a large number of children often qualify for this deduction because the total cost of healthcare for multiple children is often high. Taxpayers who recently had a child or were diagnosed with a life threatening illness are likely to meet the deduction requirements due to do multiple checkups and hospital visits.

There are a number of taxpayers who carefully keep track of the amount of money or items that they donate to charities; however, the majority of taxpayers do not which makes charitable donations another frequently overlooked tax deduction. Individuals who donated money, clothing, or household items are able to claim a tax deduction as long as the charity is approved by the Internal Revenue Service (IRS). The majority of most well known charities are approved; however, individuals can obtain a full list by visiting the website of the Internal Revue Service (IRS) which can be found at http://www.irs.gov.

Unfortunately there are a number of taxpayers who will qualify for a natural disaster tax deduction. With the recently active 2005 hurricane season and the dreadful predictions of more to come it is likely that a large number of individuals will qualify for a natural disaster tax deduction. This deduction is used to make up for the amount of property damage that was not covered by homeowners insurance. To qualify for a natural disaster tax deduction the property loss must be at least ten percent of an taxpayers income. It is sad to say, but with the majority of tornadoes, hurricanes, and floods is it not uncommon for a home to be completely destroyed which would allow the tax deduction to be claimed.

With many businesses declaring bankruptcy or laying off their workers there is an increased number of individuals looking for a job. Another one of the most frequently overlooked tax deductions is that of expenses related to a job search. Many job seeker know how expensive looking for a new job can be. It is possible for job seekers to claim tax deductions on their phone expenses that are related to a job search. These phone expenses may include long distance telephone calls to set up an interview or even over the phone interviews. In addition to phone expenses job seekers can also claim the mileage of going to and from a job interview. Other job search deductions may include the cost of having a resume professionally prepared and the costs of mailing or faxing out that resume.

Additional frequently overlooked tax deductions include the amount of money spent on sales tax, tax preparation, gambling losses, property taxes, and more. The best way to become aware about the most frequently overlooked tax deductions is by using a tax software program to prepare your taxes or hiring the services of a professional tax preparer. These are great ways to become aware of commonly overlooked tax deductions and to determine if you qualify for them.

About The Author
Gray Rollins is a featured writer for http://www.taxhelpdirectory.com/.
To learn more about tax deductions, please visit, http://www.taxhelpdirectory.com/taxdeduction/.

Writen By : Gray Rollins

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Tax Deductions On Car Donation Explained

Jul 22

Posted by admin in Taxes

Any donation you make to help out a worthy cause can also help you with your taxes. If you have an old car parked in your garage and you don?t know what to do with it, car donation is a wonderful way to help a charity. Although the car donation laws have changed, this is still a good way to help yourself and others too.

In 2005, the laws changed regarding tax deductions on boats, vehicles or airplanes that are valued over $500. Now, the charity must provide written documentation or acknowledgement within the 30 days of processing your donation. If the charity gives an exaggerated or false statement, they can be fined or penalized.

Under the January 2005 rules, your tax break is based on how the charity uses the donated vehicle. If the car is sold, the gross sale price can be deducted. If the charity uses the donated car following the new law for ?significant? charity work that is tax approved, you?ll be able to deduct the market value of the vehicle. However, some stiff penalties will be charged for falsified documents. The law is watching carefully those charities not following the rules and regulations involved with car donation.

Even though the old laws had some problems, many charities are skeptical about the new car donation laws. A lot of organizations are concerned about what might happen when the responsibility of tax deduction is put under the authority of the charity rather than the donor. Some of them have actually sent a letter to the Treasury Secretary that suggests that people may be discouraged from donating cars if they aren?t aware of the deduction amount that will be allowed. This, they fear will mean that some donors will be lost. Charities feel that donors must be able to weigh the cost of benefit in order to know if it is enough for them.

If you do decide to pursue car donation, you will find out that the process is easy. You can contact most charities by phone or online. It is important to ask the charity you wish to get involved with for some specific and important information. This is necessary in order to avoid complications and also be sure you understand the process. It?s not hard, but does require you to fill out some important information and get the car ready.

Daniel Richards has an interest in Automobile related topics. To access more information on vehicle donation or how to donate a car to charity please click on the links.

Writen By : Daniel Richards

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Deducting Miles Driven On Behalf Of A Charity

Jul 19

Posted by admin in Taxes

A taxpayer may usually deduct 14 cents per mile for all miles driven on behalf of a charity (Section 170(i)). The primary purpose of the travel must be to contribute to the mission of the charity. In addition, the travel must not provide the taxpayer with any significant amount of personal pleasure, recreation, or vacation (Section 170(j)). Further, a taxpayer may not deduct the miles driven on behalf of a charity, other than a church, if the purpose of the travel is to influence legislation (Section 170(f)(6)).

For example, if a taxpayer drove her personal automobile a total of 500 miles to procure and distribute wheelchairs on behalf of a qualified charitable organization such as LifeNets http://www.lifenets.org/, the taxpayer could deduct $70.00 (500 miles x 14 cents per mile). However, if a scoutmaster took a troop of Boy Scouts to summer camp and spent a week there with them, the scoutmaster may not deduct the miles because the trip to the summer camp has a significant element of personal pleasure, recreation, or vacation.

For miles for miles driven for relief efforts related to Hurricane Katrina after August 25, 2005, through December 31, 2006, a taxpayer may deduct 70 percent of the standard mileage rate in effect for business miles. If a taxpayer receives a reimbursement from a charity for miles driven for relief efforts related to Hurricane Katrina after August 25, 2005, through December 31, 2006, the taxpayer may exclude the reimbursement from gross income up to 100 percent of the standard mileage rate for business miles.

The standard mileage rate for business miles was 40.5 cents per mile from August 25, 2005, through August 31, 2005. The standard mileage rate for business miles increased to 48.5 cents per mile from September 1, 2005, through December 31, 2005. The standard mileage rate for business miles driven in 2006 is 44.5 cents per mile (Rev. Proc. 2005-78).

If a taxpayer does not receive any reimbursement from a charity for miles driven for relief efforts related to Hurricane Katrina, the taxpayer may deduct 29 cents per mile for miles driven from August 25, 2005, through August 31, 2005; 34 cents per mile for miles driven from September 1, 2005, through December 31, 2005; and 32 cents per mile for miles driven in 2006 (Rev. Proc. 2005-78).

If a taxpayer receives reimbursement from a charity for miles driven for relief efforts related to Hurricane Katrina, the taxpayer may exclude from gross income up to 40.5 cents per mile for miles driven from August 25, 2005, through August 31, 2005; 48.5 cents per mile for miles driven from September 1, 2005, through December 31, 2005; and 44.5 cents per mile for miles driven in 2006 (Rev. Proc. 2005-78).

In addition to the standard mileage rate, a taxpayer may deduct the cost of parking fees and tolls incurred while driving an automobile on behalf of a qualified charitable organization (Rev. Proc. 2005-78).

If a taxpayer has any doubt about the status of an organization as a qualified charity, the taxpayer may consult IRS Publication 78 at the IRS Web site: http://www.irs.gov/

A taxpayer claims the deduction for miles driven on behalf of a charity on Schedule A of Form 1040. The deduction for miles driven on behalf of a charity is included with the amounts for cash contributions on the same line of Schedule A of Form 1040.

A taxpayer should have good records such as a mileage log to document the deduction. The burden of proof is on the taxpayer to prove the amount of all deductions claimed.

If the taxpayer\’s total itemized deductions do not exceed the standard deduction amount, the taxpayer will usually not receive any benefit from the deduction for miles driven on behalf of a charity.

Alan D. Campbell is a CPA in Arkansas and Florida and is self-employed primarily as an author of tax publications. He earned a Ph.D. in accounting with an emphasis in taxation from the University of North Texas. He is also admitted to practice before the United States Tax Court. He has published numerous articles on tax topics in professional journals. He is the co-author of the book Tax Strategies for the Self-Employed and the revision editor of CCH Financial and Estate Planning Guide, 15th edition. For more tax savings strategies, please see his blog: http://taxsavingsstrategies.blogspot.com

Writen By : Alan D Campbell

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