Tag Archives: deductions

Deducting Business Expenses

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Deducting Business Expenses - Ramsay & Associates

 

As you prepare tax documents and receipts for your 2016 income tax returns, pay close attention to the items that you’ll need for business expense deductions. Deducting business expenses can lower your taxable income. Even if you aren’t self-employed or a small business owner, you can take certain business-related deductions as an individual.

Individual Tax Returns

If you are an employee, you may be able to deduct work-related expenses as miscellaneous itemized deductions. These deductions must exceed the standard deduction as well as 2 percent of your adjusted gross income. This is commonly known as the “2 percent floor,” meaning you may only deduct expenses above that amount. All deducted expenses must be from the 2016 calendar year, be business-related, and be “ordinary and necessary.”

Here are some common deductions and guidelines:

Vehicle and Travel

  • Although expenses for your regular daily commute, including parking, aren’t deductible, some local transportation costs qualify. For example, traveling from one workplace location to another would qualify, as well as from your home office to another workplace location if your home office is your primary place of business for your employer. Parking fees for a business meeting outside of your usual daily commute are deductible. More information about home offices and transportation costs is available from the IRS website.
  • Use standard mileage rates to calculate deductible costs if operating your personal vehicle for business purposes. 2016 mileage rates are 54 cents per mile for business miles, such as traveling to meet a client or attend a conference. If you do not use the standard mileage rate, you can deduct actual car expenses for the year.
  • While on a business trip, you can deduct costs incurred such as airline, train, or taxi fares, car rental, baggage fees, meals, lodging, and tips. Find more details here.

Entertainment Expenses

  • Business entertainment expenses are subject to certain limits. Generally, 50 percent of meal and entertainment expenses are allowed, with records to prove their business purpose. Learn more.

Home Office

Use of part of your home exclusively and regularly for conducting business may also allow for deductions of certain expenses, such as mortgage interest, property taxes, utilities, and home repairs. Learn more about the requirements to claim these deductions.

Other Potential Deductions

  • Memberships or dues to professional organizations
  • Job search expenses, including travel expenses
  • Work clothes or uniforms that are a condition of your employment, but that would not be suitable for everyday use

Small Business & Self-Employed

If you are self-employed or the owner of a small business, there are additional deductions and requirements to consider when filing your business taxes, excluding cost of goods sold, capital expenses, and personal expenses. Some deductible business expenses include:

  • Fees for professional services
  • Employee wages and benefits, such as health or life insurance, as well as contributions to retirement plans or profit-sharing
  • Advertising costs
    Education expenses, such as fees for seminars or courses to maintain professional certifications
  • Fees for banking, attorney, or accountant services
  • Federal, state, and local, payroll taxes

Refer to the IRS website for additional information on these and other business expenses deductions, or contact Ramsay & Associates with your questions. We provide tax preparation services businesses as well as individuals. Call us at 651.429.9111.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Updated Mileage Rate for 2015

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a car is on a calculator. cost of gasoline, wear and insurance.With the new year comes change, and in this case, an updated Standard Mileage Rate (SMR) from the IRS.

For business miles driven in 2015, the SMR is 57.5 cents per mile, up from 56.0 cents in 2014. This increase in the rate is even better when one considers the plunge in gas prices over the last six months – locally we’re seeing regular unleaded under $2.00 per gallon, and in some places under $1.90.

A bigger deduction that costs less to create? That’s an unusual win-win for taxpayers.

Also, remember to keep a mileage log showing the miles driven, the date, and what the business purpose was. This comes up routinely on audit, and not having the documentation is one of the biggest ways taxpayers end up owing the government.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Tax Extenders Bill Passes – With Two Weeks To Spare

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Irs Federal Income Tax Forms 1040 And Schedule DBusinesses, individuals, and CPA’s around the country got an early holiday gift today as the Senate passed a tax extenders bill the President is expected to sign into law later this week.

The extender bill is quite similar to most we’ve seen in the past – this is the 6th tax extender bill passed near (or after) the end of the year in the last decade. This one puts back into place as of 1/1/14 a large number of benefits popular among taxpayers, but only keeps them in place through 12/31/14, so this debate will come again next year, but we’re happy to have these for now.

Among the more popular items extended for 2014:

  • $500,000 Section 179 limitation with a $2 million investment cap, up from the $25,000/$500,000 that would have been
  • 50% bonus depreciation on new fixed assets in service by 12/31/14
  • The Research and Development Tax Credit
  • Exclusion from income up to $2 million of debt forgiven on a principle residence foreclosure or short sale
  • $250 deduction for out of pocket expenses for teachers
  • Option to deduct sales taxes instead of state and local income taxes
  • Deduction of certain mortgage insurance premiums
  • Deduction of up to $4,000 for higher education tuition and fees
  • Ability to transfer up to $100,000 from an IRA to a charity with no tax
  • Ability to deduct up to $250,000 of qualified leasehold improvements up front
  • 15-year life for qualified leasehold improvements

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Waiting on Tax Renewals – In Santa’s Bag?

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Irs Federal Income Tax Forms 1040 And Schedule DAs the end of the year approaches, we’re seeing the usual jockeying by Congress to clear their calendar of easy items before they all head home for the holiday break, and come back to a lame duck Congress and a President with nothing to lose. In all of this, the one thing missing so far is a tax extension bill.

The House and Senate had reached a compromise a few weeks back to extend the expired tax breaks in the short run, but that bill was threatened with veto by the President who thought it favored businesses and the wealthy over middle and low income Americans. The President also wanted extensions on the middle and low income tax breaks to run through 2018, an apparent attempt to keep a future Republican President and Congress from undoing what he’s done. This bill is dead.

Now, there is another bill coming out of the Republican controlled House to simply extend all of the expired items for the 2014 tax year, but Senate Majority Leader Harry Reid has indicated that it might not come up in the Senate, as they need to pass both a bill to fund the Federal government and a military funding bill before they can get to the tax extenders.

Either way, this will be yet another year that doesn’t see the tax code actually resolved until well after the end of the year, meaning confusion for taxpayers. Stay tuned.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

2015 IRS Updates – Part 1

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Irs Federal Income Tax Forms 1040 And Schedule DWith the mid-term elections behind us and the end of the year approaching, the IRS is working to gear up for the upcoming tax season. As part of this process, they’ve released several updates for limitations, write-offs and expected filing dates. We expect to see more as the end of the year gets closer, but here are a few of the highlights so far. This will be one of at least two posts on the subject.

  • Standard Deduction:
    • $12,600 Married Filing Jointly (MFJ)
    • $6,300 Single
    • $9,250 Head of Household (HOH)
    • $6,200 Married Filing Separately (MFS)
  • Roth IRA Phaseouts – income at which ability to use a Roth IRA is reduced or eliminated:
    • $183,000 to $193,000 MFJ
    • $116,000 to $131,000 HOH
    • $0 and $10,000 MFS
  • Section 179 expensing (unless renewed by congress)
    • $25,000 of deduction for equipment placed in service in 2014
    • Dollar for dollar phaseout of deduction starts at $200,000 of equipment purchases, if purchases are over $225,000, no deduction is allowed

More to come as we near the end of the year.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.