Archive for the ‘Tax Breaks’ Category

Deducting Job Hunting Expenses

by P. Lewis Robinson
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Oct
12

If you or someone in your family is looking for a new job, you should be aware of the income tax deduction that may be available with respect to job-search costs. Qualifying expenses are deductible even if they don’t result in a new position being offered or accepted.

What are job hunting expenses. Expenses of seeking new employment can encompass a broad range of items. Some of the more common expenses for which deductions have been allowed are:

  • the cost of resumes, including postage for sending them to prospective employers;
  • job counselling and referral fees;
  • employment agency fees;
  • telephone charges related to seeking new employment;
  • local as well as out-of-town travel for interviews, to the extent not reimbursed by the prospective employer. (more…)
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Nine Tips on the 10 Percent Tax on Tanning Services

by P. Lewis Robinson
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Jul
8

Starting July 1, 2010, many businesses offering tanning services must collect a 10 percent excise tax on the tanning services they provide. This excise tax requirement is part of the Affordable Care Act that was enacted in March 2010. (more…)

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Take Advantage of Commuter Tax Breaks

by P. Lewis Robinson
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Jul
6

Our beloved Congress has granted nice tax breaks for some transportation-related employee fringe benefits. Several of these breaks are intended to encourage you to give up your evil, gas-guzzling, pollution-spewing vehicle when commuting to work. If your employer offers these tax-favored fringes, you should probably take advantage. After all, you might not be able to find much gasoline at any price after our entire oil supply winds up in the Gulf of Mexico

(more…)

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Two New Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers

by P. Lewis Robinson
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Mar
18

  WASHINGTON — Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enacted into law today. (more…)

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7/6/09 – Tax Breaks That Are Set to Expire in 2009

by P. Lewis Robinson
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Jul
6
You may have heard the expressions “make hay while the sun shines” or “strike while the iron is hot.” These old proverbs are particularly relevant to current tax laws. More and more often, Congress is enacting tax breaks on a temporary basis, creating “limited time only” offers.
 
Some of these temporary breaks may eventually be extended by Congress; others may not. Where practical, you may want to take advantage of the breaks while they are available. 
 
To help get you started, here are a few breaks that are currently set to expire in 2009.
 
If you claim the standard deduction for 2009, you may also claim an additional deduction for real estate property taxes.

 

Whether you claim the standard deduction or itemize your deductions for 2009, you can deduct the sales tax you pay on a car or truck purchased by December 31, 2009 (the deduction is phased out if your income is too high).

 

If you itemize your deductions for 2009, you can choose to deduct state and local sales taxes instead of claiming a deduction for state income taxes.

 

If you buy a principal residence by December 1, 2009 and haven’t owned a home during the prior three years, you are entitled to a tax credit of up to $8,000 (but again, there is a phase-out if your income is too high).

 

If you are age 70½ or over and own an IRA, you don’t have to withdraw any funds from your IRA in 2009 unless you wish to.

 
There are other breaks scheduled to expire in 2009 and still others will expire in 2010. If you would like more information, please contact us.

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3/2/09 – Reduced Estimated Tax Burden in 2009 for Individuals With Small Businesses

by P. Lewis Robinson
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Mar
2

To the extent that tax isn’t collected through withholding, taxpayers generally are required to make quarterly estimated payments of tax, in an amount determined by the required annual payment. The required annual payment is the lesser of 90% of the tax shown on the return or 100% of the tax shown on the return for the prior tax year. However, under Code Sec. 6654(d)(1)(C) , the prior-year percentage is 110% if adjusted gross income (AGI) for the preceding year exceeded $150,000). An underpayment results if the required payment exceeds the amount (if any) of the installment paid on or before the due date of the installment.  

The period of the underpayment runs from the due date of the installment to the earlier of (1) the 15th day of the fourth month following the close of the tax year or (2) the date on which each portion of the underpayment is made. If a taxpayer fails to pay the required estimated tax payments under the rules, a penalty applies, determined by applying the underpayment interest rate to the amount of the underpayment for the period of the underpayment. The penalty for failure to pay estimated tax is the equivalent of interest, which is based on the time value of money.  
Taxpayers are not liable for a penalty for the failure to pay estimated tax in certain circumstances (e.g., for U.S. persons who did not have a tax liability the preceding year; if the tax shown on the return for the tax year (or, if no return is filed, the tax), reduced by withholding, is less than $1,000; or the taxpayer is a recently retired or disabled person who satisfies the reasonable cause exception).  
New law. Effective on Feb. 17, 2009, the Recovery Act provides that notwithstanding Code Sec. 6654(d)(1)(C) , for any tax year beginning in 2009, in computing the amount of the required annual installments of estimated income tax of any qualified individual, “required annual payment” means the lesser of (1) 90% of the tax shown on the return for the tax year, or (2) 90% of the tax shown on the return of the individual for the preceding tax year. ( Code Sec. 6654(d)(1)(D) , as amended by Act Sec. 1212; Committee Report)  
A qualified individual means any individual if the AGI on the tax return for the preceding tax year is less than $500,000 ($250,000 if married filing separately) and the individual certifies that at least 50% of the gross income shown on the return for the preceding tax year was income from a small trade or business. For estates and trusts, AGI is determined under Code Sec. 67(e) . A small trade or business is one that employed no more than 500 persons, on average, during the calendar year ending in or with the preceding tax year. ( Code Sec. 6654(d)(1)(D) )    © 2009 Thomson Reuters/RIA. All rights reserved 
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7/14/08 – Tax Breaks for Your Investment Losses

by P. Lewis Robinson
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Dec
10

 July 14, 2008

 

Tax Breaks for Your Investment Losses

In today’s tough economy, investments in personal portfolios,
401(k) plans, and individual retirement accounts (IRAs) may be down. Fortunately, the tax law lets you ease your financial pain by claiming tax breaks for bad investments. But not every loss, no matter how real or how large, is tax deductible.

Go to the link below for more details:

J.K. Lasser – Tax Breaks for Your Investment Losses

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7/14/08 – Tax Breaks for Your Investment Losses

by P. Lewis Robinson
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Dec
10

 July 14, 2008

 

Tax Breaks for Your Investment Losses

In today’s tough economy, investments in personal portfolios,
401(k) plans, and individual retirement accounts (IRAs) may be down. Fortunately, the tax law lets you ease your financial pain by claiming tax breaks for bad investments. But not every loss, no matter how real or how large, is tax deductible.

Go to the link below for more details:

J.K. Lasser – Tax Breaks for Your Investment Losses

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6/1/08 – Tax Breaks for Summer Vacation Homes

by P. Lewis Robinson
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Dec
9

Tax Breaks for Vacation Homes 

With summer around the corner and the real estate market ripe for the picking (because real estate prices and mortgage interest rates are both down), the number of owners of vacation property could grow. The National Association of Realtors reports that vacation homes account for one-third of all new- and existing-home sales. If you own or are considering the purchase of a vacation home, factor in tax breaks that could lower your ownership costs and make this investment an attractive one for you.  

Vacation homes 

Most people think of vacation homes as ski chalets or beachfront property. The tax law doesn’t restrict many of the breaks for vacation homes to these types of properties. Vacation homes can include a boat or an RV, as long as the property includes sleeping, cooking, and toilet facilities.  

Even time shares may qualify for certain tax breaks that go with home ownership.  

Current deductions 

You can deduct certain costs related to ownership of vacation property if you itemize deductions:  

·         Real estate taxes. Any property taxes paid on a vacation home are deductible; there is no limit.  

·         Mortgage interest. You can designate a second home to qualify for deductible mortgage interest. The same limits for a primary residence apply to a vacation home ($1 million for acquisition debt, plus $100,000 for home equity debt). Caution: If you pay any points to obtain the mortgage, the points are deductible ratably over the term of the loan (they can’t be deducted in the year of the home’s purchase like they can with a main home).  

Renting out your vacation home 

Since you don’t use your vacation home every day, it’s not uncommon to rent it out for days or weeks at a time. The amount of time you use your home and the days it’s rented to others at a fair rent determine your tax breaks:  

·         If the rental is no more than 14 days-you don’t have to report the rental income. However, you can’t deduct any maintenance or other costs beyond those allowed for real estate taxes and mortgage interest.  

·         If the rental is more than 14 days and your personal use is more than 14 days or 10% of the rental days-you can deduct some additional expenses such as maintenance, insurance, and depreciation, but only to the extent of rental income. It is unlikely that a time-share owner who uses his property can ever qualify for these added deductions because of the numbers; his or her personal use usually will not be more than 14 days or 10% of the rental days.  

·         If the rental is more than 14 days but personal use is not more than 14 days or 10% of the rental days-you are considered to hold investment property. You can deduct all of your expenses, subject to the passive loss rules. These rules generally limit annual rental losses to the extent of rental income. However, those with adjusted gross income of no more than $100,000 are allowed to claim rental losses each year up to $25,000.  

Tax treatment on the sale 

Hopefully, when you sell the home, you’ll make a profit. The sale of a vacation home usually doesn’t qualify for the home sale exclusion on the resulting gain; the exclusion of $250,000 ($500,000 on a joint return) applies only to a principal residence.  

However, a vacation home can become a principal residence. You must own and live in it for at least two years prior to the date of sale in order to apply the home sale exclusion against capital gains on the sale.  

For example, say you own two homes, your main one and a vacation property. In 2008, you sell your main home, the one you’ve owned and lived in for years. You move into your vacation property and occupy it as your main home. Once you’ve satisfied the two-year test, then you can sell this property (it is now your main home) and again use the home sale exclusion.  

Tax-free exchange. If you can’t claim the exclusion (you have a main home at the time you sell your vacation property), you may be able to postpone reporting the gain by swapping the property for other vacation property. Under the like-kind exchange rules, a trade qualifies if both the property relinquished and the newly acquired property are held for investment.  

The IRS has created a safe harbor under which it will not challenge whether a dwelling unit qualifies as investment property for purposes of the like-kind exchange rules. The properties will be considered investment property if three conditions are met: (1) each property is owned for at least 24 months, (2) the homeowner rents the property at a fair rental for 14 days or more during those 24 months before and 24 months after the trade, and (3) the homeowner’s personal use does not exceed 14 days or 10% of the number of rental days during a 12-month period (for each of the two 12-months prior to the trade and two 12-month periods after the trade).  

Sale at a loss: If you sell your vacation home at a loss, you cannot deduct the loss. No write-off is allowed for a loss on a personal asset.  

However, if you’ve rented out your vacation home, it may be considered investment property, rather than personal-use property, and a loss would be allowed in this situation. 

J.K. Lasser

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1/21/08 – Tax Breaks Lapsed for 2008

by P. Lewis Robinson
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Dec
9

The following tax breaks lapsed for 2008:

  •          Tax-free IRA payouts to charity
  •         15 year write off of tenant and restaurant improvements
  •         Tax deduction for sales tax, college tuition and teacher supplies

We expect all of these provisions to be extended during 2008. We will let you know when and if they are.

 You can’t use your IRA to get around the wash-sale rule. Having your IRA quickly buy back stock that you sold at a loss will trigger this rule, IRS says. The wash-sale rule bars a deduction for a loss on the sale of a security if you purchase an identical one within 30 days before or after the sale.

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