The standard mileage rate for business vehicle use is 55.5 cents for the July-Dec, 2011 period. For Jan-June, 2011, the rate was 51 cents per mile.
Other rate changes:
Medical miles: Jan-June = 19 cents; July-Dec = 23.5 cents
Moving expense miles: same as Medical miles
The rate for Charity miles remains 14 cent per mile.
Monday, June 27, 2011
Sunday, June 19, 2011
Earned Income Credit
The IRS has been concerned for some time with abuse of the Earned Income Credit. They have adopted a number of rules and requirements to combat that abuse. Tax preparers will probably have more hoops to jump through in coming years to substantiate the validity of the credit claimed. Some checklists exist which have been used voluntarily, but they may become required forms. No exact timetable has been given for such changes.
Tuesday, May 31, 2011
Gift tax crackdown
As we reported in February, the IRS is trying to track down people who have failed to file gift tax returns. Recently they tried to get the state of California to give them records on people who transfer real estate to family members for no money or very little money. State attorneys argued in court that the records exist at the county level, not the state level, and that therefore the state could not do it. The court agreed. The IRS was directed to seek the records at the county level. There are 58 counties in California. The IRS has not said yet what it intends to do. A couple of possibilities are: (a) Proceed in contacting the counties, or (b) Move on to another state that might be easier to deal with. Massachusetts in recent years has moved many county functions to the state level, so we should not rule out the IRS snooping around here.
Friday, May 6, 2011
Buying business assets
Machinery and equipment purchased in 2011 can be directly expensed (rather than depreciated) up to a value of $500,000. (Unless you buy more than $2,000,000 worth of such items.) In addition to machinery and equipment, this year you can also write off most types of leasehold improvements, restaurant property and retail improvements. These deductions come under the heading of what is known as "Section 179." The assets can be new or used.
These big breaks are not available for cars and light trucks under Section 179, but there is another depreciation provision known simply as bonus depreciation. This provision allows a 100% deduction for NEW assets purchased in 2011. (Remember, it has to be new, not used.) Also, it must have a recovery period of more than 20 years (so real estate is not allowed), and it must not be "listed property" (vehicles etc.) used less than 50% for business.
The 100% falls to 50% in 2012.
For Massachusetts taxes, the bonus depreciation deduction is not recognized, so you could end up with different depreciation calculations on the Federal and state returns. It could result in much higher taxable income for Massachusetts than for the federal return. Massachusetts does recognize the Section 179 deduction.
There, is that complicated enough? And that's only the simple part.
These big breaks are not available for cars and light trucks under Section 179, but there is another depreciation provision known simply as bonus depreciation. This provision allows a 100% deduction for NEW assets purchased in 2011. (Remember, it has to be new, not used.) Also, it must have a recovery period of more than 20 years (so real estate is not allowed), and it must not be "listed property" (vehicles etc.) used less than 50% for business.
The 100% falls to 50% in 2012.
For Massachusetts taxes, the bonus depreciation deduction is not recognized, so you could end up with different depreciation calculations on the Federal and state returns. It could result in much higher taxable income for Massachusetts than for the federal return. Massachusetts does recognize the Section 179 deduction.
There, is that complicated enough? And that's only the simple part.
After tax season
We didn't have much time for blogging during the tax season. We hope to catch up a little now.
What are the prospects for tax reform? If the tax system were overhauled, what might it look like?
One possible outline issued by a government commission envisions three tax rates: 12%, 22% and 28%. There would be no alternative minimum tax, but only two types of itemized deductions would be allowed: mortgage interest and donations. No mortgage interest deduction would be allowed on second homes. Capital gains and dividends would be taxed at the regular tax rate. Municipal bonds would no longer be exempt from tax. Many other tax breaks would be eliminated.
Of course, this is not likely to happen soon, and if and when anything does happen, it will certainly be quite different from the above outline. This just gives an idea of what some of the thinking is. There is a lot of other thinking going on, too, but nothing concrete yet.
One area of concern, however, is the capital gains tax. There is a strong possibility that it will go up. The debate is likely to on for at least a couple of more years. If it begins to look as though passage is immanent, people holding appreciated assets will probably start selling like mad to avoid the coming tax bite.
What are the prospects for tax reform? If the tax system were overhauled, what might it look like?
One possible outline issued by a government commission envisions three tax rates: 12%, 22% and 28%. There would be no alternative minimum tax, but only two types of itemized deductions would be allowed: mortgage interest and donations. No mortgage interest deduction would be allowed on second homes. Capital gains and dividends would be taxed at the regular tax rate. Municipal bonds would no longer be exempt from tax. Many other tax breaks would be eliminated.
Of course, this is not likely to happen soon, and if and when anything does happen, it will certainly be quite different from the above outline. This just gives an idea of what some of the thinking is. There is a lot of other thinking going on, too, but nothing concrete yet.
One area of concern, however, is the capital gains tax. There is a strong possibility that it will go up. The debate is likely to on for at least a couple of more years. If it begins to look as though passage is immanent, people holding appreciated assets will probably start selling like mad to avoid the coming tax bite.
Wednesday, April 6, 2011
1099 Never-Mind
The new requirements discussed in my 2/19/11 and 1/10/11 posts have now been repealed, pending the President's signature.
Monday, March 7, 2011
The Residential Energy Credit survived for 2010, and it has been extended in limited form into 2011. However, in 2010 it is limited to $1,500, and if you took the credit in 2009, the amount you took in that year reduces the amount you can take in 2010. For example, if you took a credit of $500 in 2009, your limit for 2010 is $1,000.
The limit in 2011 is only $500, and all the Residential Energy Credits you have taken since 2006 go towards reducing that limit. The credit has also been limited somewhat in the things that it covers, but it will still be good for windows, doors, insulation, certain kinds of roofs, qualified furnaces, etc.
The credit is good for your main home only. It is not for property you rent out to others. Also the home must be located in the United States.
The limit in 2011 is only $500, and all the Residential Energy Credits you have taken since 2006 go towards reducing that limit. The credit has also been limited somewhat in the things that it covers, but it will still be good for windows, doors, insulation, certain kinds of roofs, qualified furnaces, etc.
The credit is good for your main home only. It is not for property you rent out to others. Also the home must be located in the United States.
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