deductions

Deductions for Long-Term Care Insurance

Many people are taking a closer look at buying long-term care insurance to protect themselves and their families — just in case. If you are thinking about buying long-term care insurance, you’ll be interested to know that, within limits, premiums paid for qualified policies are deductible as an itemized medical expense. For 2019, premiums for qualified policies are tax-deductible to the extent that they, along with other unreimbursed medical expenses, exceed 10% of your adjusted gross income.

The typical long-term care insurance policy will pay for the nursing home, home care, or other long-term care arrangements after a waiting period has expired, reimbursing expenses up to a maximum limit specified in the policy. Eligibility for reimbursement usually hinges on the covered individual’s inability to perform several activities of daily living, such as bathing and dressing.

Premiums are eligible for a deduction only up to a specific dollar amount (adjusted for inflation) that varies depending upon the age of the covered individual. The IRS limits for 2019 are:

Long-Term Care Insurance Premium Deduction Limits, 2019
Age Premium Limit
40 or under $420
41-50 $790
51-60 $1,580
61-70 $4,220
Over 70 $5,270

Source: Internal Revenue Service

These limits apply on a per-person basis. For example, a married couple over age 70 filing a joint tax return could potentially deduct up to $10,540 ($5,270 × 2). Keep in mind, however, that, for individuals under age 65, itemized medical expenses are deductible only to the extent that they, in total, exceed 10% of adjusted gross income (AGI).

As everyone’s situation is different, consider contacting your tax and legal professionals to discuss your personal circumstances.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v

Should You Sell Your Under Performing Stock and then Buy it Back?

You sold one of your stock investments at a profit, so now you’ll have to report a capital gain on this year’s income tax return. Since another stock you own has been losing ground lately, you’re thinking of selling it to claim a capital loss on your return to offset your gain.

However, because you believe the company will bounce back eventually, you’re reluctant to part with your stock. What would happen if you sold your stock to claim the loss and then bought it back again right away?

Wash-Sale Rules

At first glance, it might appear to be the perfect plan. But it won’t work because of the tax law’s wash-sale rules. These rules prevent you from claiming a capital loss on a securities sale if you buy “substantially identical” securities within 30 days before or after the sale. If you want to claim the loss, you’ll have to wait more than 30 days to repurchase stock in the company.

Gone for Good?

Wondering what happens to wash-sale losses you can’t deduct? They don’t just disappear from your tax calculations. Instead, you’re allowed to add the losses to the cost basis of the shares you reacquire. This increase in cost basis will mean a smaller capital gain (or a larger loss) when you eventually sell your shares.

Potential Trap

Keep track of any share purchases you make through a stock dividend reinvestment plan or by having mutual fund distributions automatically reinvested. Selling shares of the same stock or mutual fund at a loss within 30 days of the automatic purchase (before or after) will trigger the wash-sale rules, and part of your loss will be disallowed.

Is There a Plan B?

Is there any way you can take your tax loss and still maintain your position in the stock? You may be able to double up on the loss securities, then wait 30 days and sell your original securities at a loss. Be sure to consult your tax advisor before taking this, or any, action.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v

Keeping Up With Your IRA: Tax Season Checklist

If you’re one of the millions of American households who own either a traditional individual retirement account (IRA) or a Roth IRA, then the onset of tax season should serve as a reminder to review your retirement savings strategies and make any changes that will enhance your prospects for long-term financial security. It’s also a good time to start an IRA if you don’t already have one. The IRS allows you to contribute to an IRA up to April 15, 2019, for the 2018 tax year.

This checklist will provide you with information to help you make informed decisions and implement a long-term retirement income strategy.

Which Account: Roth IRA or Traditional IRA?

There are two types of IRAs available: the traditional IRA and the Roth IRA. The primary difference between them is the tax treatment of contributions and distributions (withdrawals). Traditional IRAs may allow a tax deduction based on the amount of a contribution, depending on your income level. Any account earnings compound on a tax-deferred basis and distributions are taxable at the time of withdrawal at then-current income tax rates. Roth IRAs do not allow a deduction for contributions, but account earnings and qualified withdrawals are tax-free .1

In choosing between a traditional and a Roth IRA, you should weigh the immediate tax benefits of a tax deduction this year against the benefits of tax-deferred or tax-free distributions in retirement.

If you need the immediate deduction this year — and if you qualify for it — then you may wish to opt for a traditional IRA. If you don’t qualify for the deduction, then it’s almost certainly a better idea to fund a Roth IRA.

Case in point: Your ability to deduct traditional IRA contributions may be limited not only by income but by your participation in an employer-sponsored retirement plan. (See callout box below.) If that’s the case, a Roth IRA is likely to be the better solution.

On the other hand, if you expect your tax bracket to drop significantly after retirement, you may be better off with a traditional IRA if you qualify for the deduction. You could claim an immediate deduction now and pay taxes at the lower rate later. Nonetheless, if your anticipated holding period is long, a Roth IRA might still make more sense. That’s because a prolonged period of tax-free compounded earnings could more than makeup for the lack of a deduction.

Traditional IRA Deductible Contribution Phase-Outs
Your ability to deduct contributions to a traditional IRA is affected by whether you are covered by a workplace retirement plan.

If you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA will be reduced (phased out) if your modified adjusted gross income (MAGI) is:

  • Between $101,000 and $121,000 for a married couple filing a joint return for the 2018 tax year.
  • Between $63,000 and $73,000 for a single individual or head of the household for the 2018 tax year.

If you are not covered by a retirement plan at work but your spouse is covered, your 2017 deduction for contributions to a traditional IRA will be reduced if your MAGI is between $189,000 and $199,000.

If your MAGI is higher than the phase-out ceilings listed above for your filing status, you cannot claim the deduction.

Roth IRA Contribution Phase-Outs
Your ability to contribute to a Roth IRA is affected by your MAGI. Contributions to a Roth IRA will be phased out if your MAGI is:

  • Between $189,000 and $199,000 for a married couple filing a joint return for the 2018 tax year.
  • Between $120,000 and $135,000 for a single individual or head of the household for the 2018 tax year.

If your MAGI is higher than the phase-out ceilings listed above for your filing status, you cannot make a contribution.

Should You Convert to Roth?

The IRS allows you to convert — or change the designation of — a traditional IRA to a Roth IRA, regardless of your income level. As part of the conversion, you must pay taxes on any investment growth in — and on the amount of any deductible contributions previously made to — the traditional IRA. The withdrawal from your traditional IRA will not affect your eligibility for a Roth IRA or trigger the 10% additional federal tax normally imposed on early withdrawals.

The decision to convert or not ultimately depends on your timing and tax status. If you are near retirement and find yourself in the top income tax bracket this year, now may not be the time to convert. On the other hand, if your income is unusually low and you still have many years to retirement, you may want to convert.

Maximize Contributions

If possible, try to contribute the maximum amount allowed by the IRS: $5,500 per individual, plus an additional $1,000 annually for those age 50 and older for the 2018 tax year. Those limits are per individual, not per IRA.

Of course, not everyone can afford to contribute the maximum to an IRA, especially if they’re also contributing to an employer-sponsored retirement plan. If your workplace retirement plan offers an employer’s matching contribution, that additional money may be more valuable than the amount of your deduction. As a result, it might make sense to maximize plan contributions first and then try to maximize IRA contributions.

Review Distribution Strategies

If you’re ready to start making withdrawals from an IRA, you’ll need to choose the distribution strategy to use: a lump-sum distribution or periodic distributions. If you are at least age 70½ and own a traditional IRA, you may need to take required minimum distributions every year, according to IRS rules.

Don’t forget that your distribution strategy may have significant tax-time implications if you own a traditional IRA because taxes will be due at the time of withdrawal. As a result, taking a lump-sum distribution will result in a much heftier tax bill this year than taking a minimum distribution.

The April filing deadline is never that far away, so don’t hesitate to use the remaining time to shore up the IRA strategies you’ll rely on to live comfortably in retirement.

Source/Disclaimer:

1Early withdrawals (before age 59½) from a traditional IRA may be subject to a 10% additional federal tax. Nonqualified withdrawals from a Roth IRA may be subject to ordinary income tax as well as the 10% additional tax.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v

Finding the right route: special topics for LGBT couples

Tax-Saving Tips for LGBT Couples

The issues around marriage equality caused lots of debate, but it was federal tax laws that finally prompted the Supreme Court to take a look. Prior to the 2013 United States v. Windsor decision, same-sex couples who were legally married in states or countries that recognized their union were unable to take advantage of certain federal benefits. For example, individuals in same-sex marriages were ineligible for the insurance benefits of their spouses who worked in government, and they could not receive social security survivor’s benefits or file joint tax returns.

The 2013 United States v. Windsor decision and the 2015 Obergefell v. Hodges decisions changed these practices, and LGBT couples became eligible for federal tax savings that were previously unavailable. The Amazon Best Selling book, The Great Tax Escape, offers a comprehensive look at making the most of these programs to enjoy greater tax savings.

Choosing Your Filing Status

The first tax-related issue to consider after you are married is how you will file your returns. Depending on your income, “married filing separately” could offer larger savings than “married filing jointly”. There is a phenomenon knows as “the marriage penalty”. This references the tax increase that many couples face when filing joint returns versus single returns.

Tax specialists can assist with significantly reducing tax liability through a combination of smart financial planning, examination of the impact of each filing status, and a review of all possible deductions. Filing status is expected to be particularly relevant for the 2018 tax year, as new tax regulations with revised tax brackets may reduce or eliminate the marriage penalty.

Quick Tips to Avoid Tax Filing Pitfalls

Completing your tax returns after you are married is not necessarily more complicated than filing as single, but there are a few differences to keep in mind. Small errors can lead to major frustration if your returns are rejected or you have to file an amended form. These are the most common pitfalls – and how to avoid them:

  • You must either choose “married filing jointly” or “married filing separately”. Other filing statuses are not permitted, including “head of household”. (Note: There is an exception available for married couples who have lived apart for six months or more.)
  • Your spouse cannot be listed as your dependent.
  • If you choose “married filing separately”, only one spouse can claim each dependent child.
  • Married couples must choose the same option with regard to itemizing deductions versus claiming the standard deduction.

Your Certified Tax Coach can provide the guidance you need to complete your returns correctly.

New Options for Reducing Estate Taxes

The underlying issue that prompted United States v. Windsor was the application of federal estate tax regulations. In short, married couples pay far less when a spouse dies than they would if no marriage existed. The individual who brought the suit wanted the same benefits as married couples who are opposite-sex. Today, all married couples can enjoy the tax savings that come with careful estate planning. Your Certified Tax Coach is an excellent resource for putting a tax minimization strategy in place to protect your wealth after one partner passes away.

For more tips on how LGBT couples can increase tax savings, visit our consultation form for your copy of our new release, The Great Tax Escape.

Expertly navigate the labyrinth of the tax code 23 tax saving tips for doctors

Quick Tips for Tax Savings: Physician Edition

Doctors offer critical services to the community through prevention and treatment of health issues. However, getting the necessary education and experience can be challenging – both physically and financially. In an effort to make life a bit easier for physicians, lawmakers have put together a variety of programs to reduce tax liability for doctors. Maximizing these opportunities in combination with other tax-reduction strategies can dramatically increase the rewards of working as a healthcare provider. The Amazon Best Selling book, The Great Tax Escape, includes in-depth information on taking advantage of these tax savings techniques. Learn how to get a free copy of The Great Tax Escape here.

Small Changes Add Up to Big Savings

It may not be possible to implement all available tax savings strategies at once, but making small changes in managing your practice quickly adds up. Over time, continue to add layers of savings by implementing additional strategies. Before long, you will see your tax bill go down, even when your income is going up. These are just a few of the tips you will learn more about in The Great Tax Escape.

The Case for Specialized Financial Professionals

Free and low-cost budgeting and financial planning tools are great for those with basic financial situations. However, your position as a practicing physician is too complex for these platforms. Enlist a team of professionals with specific experience in tax issues that affect health care providers. Not only will they help you save your money more effectively – they will also assist you in planning major purchases to minimize tax expenses. Long-term, you are likely to realize a significant return on this investment.

Common Deductions You Probably Aren’t Maximizing

Though you are already aware of many deductions available to you, it is likely that you are not yet getting the maximum tax savings you are entitled to. For example, continuing education expenses, depreciation of your medical equipment, and student loan interest are frequently underreported on physicians’ tax returns. Your Certified Tax Coach can guide you through the nuances of these deductions, as well as the specific opportunities available to medical professionals.

The Benefits of Better Record-Keeping

Whether you work for yourself or you are employed by a larger healthcare organization, you are always moving at a rapid pace. For many physicians, that means letting the little things slide. While you always meticulously update your patients’ records, you are probably less careful about recording your expenses. Over the course of a year, these small charges add up, and you could be missing out on significant tax savings for want of a few receipts. Make financial record-keeping a priority, and you will notice a difference in your year-end tax bill.

Be Ready for Retirement

Paying off your student loans often takes precedence over saving for retirement – especially when you are just starting out in your career. However, contributing to your retirement accounts now has across-the-board benefits for your current and future financial state. The funds you deposit are given special tax-advantaged status, and when you contribute regularly over a long period of time, you are better able to ride out the ups and downs of the market.

For more information on tax-saving opportunities specifically impacting physicians, visit our consultation form for your copy of The Great Tax Escape.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v

Seriously? Sweat Equity is Not Deductible?

The labors of love you pour into your business may have a fair market value on the street, but how do you accurately translate your net worth?

Is it $100 an hour or does it range in the thousands? For the CEOs of some publically traded companies that number is often tens of thousands an hour.

But you won’t be able to calculate the value of your efforts until you have been paid.

What About Charity Donation?

Okay, we know, you’re worth every penny, but when you donate time to charity or you’re looking to deduct the cost of your time spent, it can cause confusion at tax time. For entrepreneurs who assume their sweat equity is deductible, this can result in shock and disappointment.

The Startup Phase

Starting a new business is an exciting time for an entrepreneur. Ideas are taking shape and heart-held dreams are becoming tangible realities. But unless they’re backed by a substantial nest egg or loan, most businesses need time to produce enough cash flow to compensate the owner for development time.

Many business owners spend hours establishing their businesses before they even open the front door (virtual or otherwise). Ensuring their company’s viability doesn’t often happen overnight. Market testing and calculating pricing take time.

What’s the legal answer to this question?

Well, perhaps it can be found in a recently decided court case. The issue? Whether or not a taxpayer can deduct the value of sweat equity, i.e. services for which he/she is unpaid.

In short, a sole proprietorship reported a loss in his business providing services at no charge. The amount was substantial: $29,500. The taxpayer used this loss as a deduction against his income of $234,000 earned that year (2014). While he had not spent any actual money out of pocket, he argued that research was needed to succeed in his business; yes, sweat equity.

The court ruled against the taxpayer in this case because, in order to take a deduction, one must pay or otherwise incur an expense to be eligible to deduct it. The labor itself is not within the meaning of Code Section 162.

Donating Time to Charity

What about taxpayers or business owners who donate their time to a charitable cause? We’ve already determined their time has value. Certainly, the court must allow for this type of deduction, right?

Well, no, not this one. Donations of services are not deductible charitable contributions. However, if business owners or taxpayers donate the value of their work in cash so the organization can hire someone else to do the work, it then becomes a tax-deductible donation.

Donated labor is not deductible even to nonprofits because, in the normal earning cycle of a business, the net value of the services donated is zero.

For example, consider service on a nonprofit board. If you charge for the work, you would earn according to your pay scale. However, in donating your services you are not paid.

Now, there’s a way around it.

If the organization pays you for your service and you then donate it, you would be reporting it as income. You would owe and pay taxes on the money earned and then be able to deduct your cash donation. By not receiving the income, you avoid reporting the fees in additional revenue for the year, and you’ll also forego the charitable deduction. Either way, the result is the same.

While your personal valuation of sweat equity you put into your business may result in Fortune 500 positioning, it won’t help you reduce your tax bill.

More questions, feel free to give us a call. As a Certified Tax Coach, we can assist you.

 

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v

Deducting Business Expenses: Your Motor-home or Recreational Vehicle

Here’s an idea: Why not purchase a motorhome or recreational vehicle and deduct it as a business expense?

As long as you use it for business this could be a really sweet deal. And if you just happen to use it for pleasure once or twice, that’s no big deal, right?

You won’t be the first person to think of this and if you don’t follow the IRS rules, you won’t be the last to experience the consequences. The courts and the IRS have battled this discussion out several times. Both have been challenged trying to confirm when the motor home is a business vehicle and when it is a business lodging facility.

Does it matter?

It does. The business aspects of owning a motorhome will qualify for tax deductions, but this comes with a set of rules.

Bear this in mind: if you travel for business and plan to deduct your motorhome as a lodging facility, be sure to count the number of nights you use it for business purposes and use that to measure the number of permissible deductions.

On the other hand, if you use your motor home or RV as a second home, you would deduct the business percentage of its use for business travel without having to consider Section 280A impediments.

It can be complicated, so be sure you understand the guidelines.

Before you can deduct the business expenses associated with your motorhome you need to determine what it actually costs to operate the business-related usage. Along with depreciation and interest or lease payments, be sure to add insurance to the equation.

Take into consideration all of the expenses associated with maintaining your RV. Here are a few other expenses to include in your calculation:

  • Motor oil
  • Gas
  • Car Washes
  • Tires
  • Licensing Fees
  • Property Tax
  • Parking
  • Tolls

Of course, you’ll only be limited to deducting your business-related expenses. Will painting or wrapping your recreational vehicle with advertisements qualify when deducting personal miles?

You know the answer….

It will not.

Maintain Good Records

The best way to ensure you maximize your allowable deductions on your motorhome or RV is to keep impeccable records. Keep a mileage log and record every single trip—business and pleasure. Make sure you have accrued more than 50 percent business nights.

Even if you think you have a great memory, don’t store this information in your head. Record every single night you use your motorhome for business or personal lodging.

Last but certainly not least, keep IRS Section 280(f)(4) top of mind. This section says the use of your motorhome for overnight business lodging produces deductions for business travel and that business travel is not subject to the vacation home rules.

For a clear explanation of tax deductions for motorhomes or RVs, contact one of our tax professionals. Better to plan ahead than to clean up a mess after the fact.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v

California Courts Put the Squeeze on Statewide Hiring Practices

In an effort to even the playing field, a unanimous decision by the California Supreme Court recently put business owners across the state in somewhat of a chokehold. With a ruling that could change the workplace status of people across the state, they’ve made it harder to classify workers as independent contractors.

Class-Action Lawsuit

The ruling came as a result of a class-action lawsuit against Dynamex Operations West, Inc. The suit charged that Dynamex, a package, and document delivery company, misclassified its delivery drivers, calling them independent contractors when they were actually employees.

If they did misclassify, they are not the only company doing the same thing. The ruling has implications for the expanding gig economy, an environment in which organizations contract with independent workers for short-term engagements.

Companies such as Uber and Lyft are also being targeted but it could extend to other business models. Hiring independent contractors versus employees is a swiftly growing trend.

The trend is popular in part because it makes good financial sense for businesses. With employment overhead rising over the last couple of decades, employers are backing away from the would-be money-suck and instead of hiring independent contractors for the jobs once held by full-time and part-time employees.

In recent years, the trend toward hiring independent contractors instead of employees has gone through the roof. A 2016 study by economists at Harvard and Princeton universities estimated 8.4% of the U.S. workforce is classified as independent contractors.

That’s 12.5 million people.

It’s a no-brainer really. Companies that hire independent contractors are not bound by the rules governing employment.

The Advantages?

No workers comp.

No deductions.

No piles of paperwork.

No minimum wage or overtime pay.

A 1099 at the end of the year does it, and they’re good to go. Contractors are in charge of managing their own responsibilities to the IRS and state governments.

End of story.

But the story doesn’t always have a happy ending.

If workers are misclassified, the business doing the hiring faces stiff fines. Employment lawyers say many are questioning whether it would be best to reclassify before someone waves a red flag in their direction.

What is an Independent Contractor?

According to the court ruling, independent contractors:

  • Perform work outside of the hirer’s core business
  • Engage in an independently established trade, occupation or business.
  • Would not reasonably be viewed as working for the hiring business.

The court says businesses that hire workers must show that the workers are working in their own established businesses, free from the control and direction of the employer. That means no established hours or expectations as would be expected of an employee.

The aforementioned ruling did not resolve the Dynamex case, but it did help define independent contractors for lower courts grappling with the dispute. The court said wage and hour laws were adopted to enable people to earn a subsistence standard of living and to protect workers’ health and safety. The laws also shield the public from having to assume financial responsibility for workers earning substandard wages or working in unhealthy or unsafe conditions, the court noted.

“This is an effort to level the unequal playing field — misclassified workers have been taken advantage of for decades,” said Gutman Dickinson, a partner at Bush Gottlieb.

The risk of misclassifying workers—intentionally or otherwise—is substantial. A worker may be denied the status of employee “only if the worker is the type of traditional independent contractor — such as an independent plumber or electrician — who would not reasonably be viewed as working in the hiring business,” the court said.

Examples of Independent Contractors:

    • Plumber
    • Electrician
    • Hairdresser
    • Copywriter
    • Computer Tech

As long as the worker is temporarily hired he or she would be classified as an independent contractor. But a cake decorator who works on a regular basis custom-designing cake—even from home—would be an employee.

This discussion is significant on many levels, not the least of which concerns the California Labor Commission. According to their website, the misclassification of workers as independent contractors costs the state roughly $7 billion in lost payroll taxes each year.

To follow these changes and others, connect with one of our tax experts.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v

Are Entertainment Deductions History?

It’s no secret that many a sale has been closed over a three-martini lunch. Client entertainment is a given in most industries and most salespeople carry a company credit card for just such transactions.

It’s also no secret that more than a little commingling goes on between personal entertainment expenditures and those that qualify as business expenditures. That is no longer an issue; at least for now. Here’s why….

Under the new tax reform, the veil separating business expenses and pleasure has come crashing down with the elimination of entertainment deductions.

Not good news for business owners who counted on this deduction to defray tax bills at the end of the year. Even the limited deduction of 50% is no longer valid for dinners or cocktails with prospective clients or service providers and similar entertainment expenses.

What could be worse?

Well, how about this: sales related entertaining such as:

  • Sporting events—nixed,
  • Boating and Golfing—nixed.
  • Theater and other shows, box seats at stadiums—yes, those too.

What Does This Mean for Tax Planners?

Will they still be able to work their magic? Their expertise as tax planners is founded in creative workarounds and alternatives. The old saying, when one door closes, another opens applies in the tax world too.

What are The Options?

Well, there’s always Internal Revenue Code Section 274(e).

Despite reforming entertainment-related expenses, this will allow some expenses to be deducted, albeit under different circumstances.

For instance, if you pay for the use of club seating or a private box at a stadium, using this as compensation for your employees will still allow this expense to be deductible.

You need to meet two criteria to make this shift:

  • Ensure your employees attend these events.
  • Include the value of each event as taxable wages.

The “downside” for your team is an additional tax that will be subject to withholding and is includable on their form W-2.

The “upside” is it will ensure you can still deduct the expense.

Are Business Meetings Still Covered?

Brace yourself for the GOOD NEWS … YES!

As always, events and entertainment expenses related to business meetings including the board of directors and employee meetings continue to be deductible, . Deductible expenses continue to include meals and beverages, subject to the 50% limitation, facility rental, décor, supplies, and ancillary costs.

Is There Any Other Way to Deduct Entertainment Expenses?

Again, yes. You can still provide entertainment to the public, your clients, or prospective customers by issuing an information tax statement to the recipient. The most common form to use would be the form 1099-Misc. The recipient will need to include it as income and it will be taxable, but your business will still benefit from the deduction.

Let’s get more creative.

You might consider charging for the event or experience, being able to use different services online like an event company in London that specializes in producing events in this city. Sure the income will be taxable, but the cost of the activity will become deductible, transforming your expense from after-tax to pre-tax dollars.

The new tax reform brings big changes but your tax planner will still be able to work with you and provide valuable advice. To find out more about how to navigate the tax laws both new and old, be sure to work with someone who is certified in tax planning. We’ll help you find the new ways to open doors to a lower tax bill!

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v

Starting a Business Are Startup Costs Deductible?

There can be no more exciting a time than to go from punching a clock to being your own boss. But starting a business means more than deductible lunch dates and setting your own hours. If you think self-employment means you get to kick back and relax, it won’t happen. Most entrepreneurs will tell you they have never worked harder.

Starting a new business takes time and money. If you do nothing else, begin with a business plan. Your investment of blood, sweat, and tears can pay off for the life of your business—as long as you make prudent choices, and a business plan will help you calculate what you’ll need and how much it will cost.

The money you invest is tax deductible, right?

Well … not always.

Don’t make the mistake of assuming all your startup costs are deductible. As long as your total startup costs are $50,000 or less, the IRS allows you to deduct a limited amount of startup costs, and also organizational costs.

On the other hand, if your startup costs for either area exceed $50,000, your allowable deductions are reduced by that dollar amount. Once you make your first sale, however, you can claim all of your business startup expenses. Read on for details.

What Are Startup Expenses?

These days no business can operate without using some form of technology. Unless you plan to use your 3-year-old laptop to run your online business, you’re going to need to purchase equipment to help facilitate your business. Oh, and you’ll need a smartphone if you want to keep up.

Of course, computers and office equipment would qualify as startup expenses. If you need to rent office space or even a cubicle in a cooperative setting, they would also qualify. However, shelf any plans to stand by the mailbox waiting for your hefty check from the IRS. Neither of these expenses can be deducted until after your first sale, at which time they will be deducted over a period of 15 years.

The Upside?

You can choose to deduct the first $5,000 in your first year of business for startup costs, and another $5,000 for organizational costs. Expenses such as legal fees, corporate filing, DBA, and related expenses fall under this designation, but only if your total startup costs are $50,000 or less. If your expenses were over $55,000 you lose the right to any deduction at all.

Make sure you save all receipts for purchases. The laws change so it’s in your best interest to be aware. Check with your tax professional, who will be aware of the latest IRS tax laws. He or she will advise as to whether your startup expenses qualify for a deduction.

 

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v