Posts Tagged ‘tax deductions explanations’
Dependent Tax Deduction – Tax Savings For Parents
Posted by admin in Tax Credit Vs Tax Deduction on March 8th, 2009
Ask any new parent, and they will tell you that the costs associated with a new baby are many, everything from bottles to diapers to cribs, strollers, and high chairs, and all of this before the child even learns to walk and talk and beg you for a pair of $500 designer jeans. Parenting is one of the most rewarding, and important jobs that a person can have, in addition to being one of the most expensive. The good news is that there are two tax breaks offered by the federal government that the majority of parents can qualify for, which are the dependent exemption and the child tax credit.
The dependent exemption is a tax break that allows you to receive an additional tax deduction of as much as $3,000 each year until your child turns 19. This is addition to the standard tax exemption that the IRS allows per person to cover basic living expenses. Single people are allowed one exemption, while married couples have the option of taking two of these exemptions per year.
The amount that you will save with this exemption depends on your current tax bracket, and generally, the higher the tax bracket, the more money you will receive, unless your income is too high to claim an exemption, but again, most people will qualify. This dependent exemption is only phased out for married couples filing jointly with an adjusted gross income of more than $300,000. Limits for single parents exist as well, and it is important to research these limits, both for married and single parents, to be sure that your income does not exceed them. If you qualify for this exemption, you can simply fill out the required lines on your tax form, including an adoption taxpayer identification or social security number for each child.
The child tax credit is available for married couples filing jointly with a reported gross income of below $13,000, although again, it should be noted that income limits for both single and married parents are revised frequently. With this credit, it is possible to receive up to $1,000 per child.
Determining the amount of credit that an individual can claim requires the completion of the child tax credit worksheet, which can be downloaded from the IRS website. You will need to provide a social security or adoption taxpayer identification number for each child in order to qualify. As with all tax information you should always check with a professional because tax laws can change every year.
By: Kelly Renaul
Article Directory: http://www.articledashboard.com
Visit our site for financial guides, retirement calculator information, articles, and information on estate planning, annuities and retirement.
Eight Ways to Reduce Tax Burden For Parents
However if you are single, you are allowed to file under the status “head of household” meaning they beat the amount of standard deduction and more beneficial tax bracket range. However, to qualify yourself as the head of household, you have to pay more than [...]
Who Counts as Your Dependent /Tax Deduction?
If a student child with earned and unearned income is eligible to be claimed as a dependent by the parents, must the parents claim them as a deduction even though it is more advantageous to both the parents and the child if they don’t?
Dependent Child of Divorced or Separated Parents
Many parents who find themselves in the midst of a dissolution action may have looming questions regarding tax obligations and entitlement to claims of tax credits or deductions.
This is especially advantageous to low income parents that have kids below the age of 16 or a young person still enrolled in school full-time. dependant tax deduction. This particular Tax Credit is based upon the number of children in [...]
Affiliate Disclosure: It is advisable to assume that any mention of a product or service on this website is made because there exist, unless otherwise stated, a material connection between the product or service owners and this website and should you make a purchase of a product or service described here the owner of this website may be compensated. To learn more, please click here.
Home | Contact | About | Privacy Policy | Sitemap
Home Improvements And Home Repairs – What Is Tax Deductible?
Posted by admin in Tax Deductions For Self Employed on March 3rd, 2009
When you are considering doing some work on your property, you need to consider whether it will fall under the category of home repair, or home improvement. This is a crucial distinction because home improvements are tax deductible, whereas home repairs are not.
So what constitutes home improvement? In its basic form, it is any task that will add to the quality and therefore the value of your home. Such tasks would include putting up a new fence, installing a new driveway, complete kitchen remodeling, extending your property to add a room, building a swimming pool or garage, constructing a deck or porch, adding insulation, installing new heating or air conditioning systems, replacing the roof, or re-landscaping your yard. All of these tasks will require capital expenditure, but will add to the value of your property and increase the equity in your home.
Home repair, on the other hand, is a task undertaken to prevent the decline or decay of your property, and a subsequent drop in value. The task is necessary to maintain your home to its existing standard, without making significant additions or improvements. Home repairs include repainting or decorating, fixing leaks or breakages, repairing cabinets and replacing fixtures that no longer function.
Generally expenditure on home repairs cannot be used to obtain a tax benefit. However, there is a possibility that you could incorporate your repairs into a home improvement project and still gain a financial advantage. If you were undertaking a large remodeling task, you would be doing a lot to improve your property and increasing the value, and if you were doing some repairs as part of this project, expenditure for the whole task could be tax deductible. In other words, next time you plan to add an extra room to your home, be sure to fix the leaky roof at the same time!
If you require refinancing to pay for your home improvements, you may be advised to wait for a drop in interest rates. If you obtain refinance and use the capital for home improvements, you will be able to deduct the loan points in that same financial year. If you choose not to use the capital to pay for home improvements, the points will be deducted over the term of the loan. If you use only a portion of the loan for home improvements, then your possible deduction is also proportional. The rest of the points will be deducted during the term of the loan. Any points not deducted by the final payoff date of the loan will be cent per cent deductible in that year.
Before you start work on your home, you really need to understand the various distinctions that allow or disallow tax deduction. You can then make a decision whether it would be financially prudent to expand your project beyond simple repairs to increase the value of your property and ensure your expenditure is tax deductible.
Home improvement tax deduction?
Home improvement tax deduction? I’m considering upgrading our formica countertops to granite and installing vinyl fencing to enclose our backyard. Would this count as a home improvement and would I be able to deduct [...]
Home Renovation Tax Credit Update
… to my attention the fact that condominium owners are also eligible for the Home Renovation Tax Credit. The units, condominium suites, in older buildings will have a component from the maintenance fees that are allocated to capital improvement and renovations. … “When preparing the tax returns, Condominium owners may not realise they are entitled to deduct a portion of the maintenance fees, into next years tax return.”
Tax Deductible Home Improvements
Many people are aware that tax deductible home improvements exist, and that by choosing carefully you can get more bang for your buck by improving the market.
Home Improvement Expense – Check For Tax Break
Every homeowner is looking for ways Professional Insulation reduce the amount of money paid to the government as taxes, so home improvement tax deductions have generated a lot of discussion among both those who own homes and those [...]
Home Ownership + Tax Deductions = FAT Tax Return
Home Ownership + Tax Deductions = FAT Tax Return If you’ve purchased, sold or refinanced your home in the past year, tax season is the best time to reap the benefits of being a homeowner!
Author: Peter J. Wilson
Peter J. Wilson continually makes papers on topics associated to kitchen remodeling and cabinets. Recording his experience in works on home improvement and remodeling the writer expressed his know-how in the area.
Article Source: http://EzineArticles.com/?expert=Peter_J._Wilson
Affiliate Disclosure: It is advisable to assume that any mention of a product or service on this website is made because there exist, unless otherwise stated, a material connection between the product or service owners and this website and should you make a purchase of a product or service described here the owner of this website may be compensated. To learn more, please click here.
Home | Contact | About | Privacy Policy | Sitemap
Tax Deductions For Self Employed
Posted by admin in Tax Deductions For Self Employed on February 28th, 2009
HMRC inquires into approximately 75,000 self assessment tax returns each year. Most tax inquiries result in extra tax being payable because business turnover has been understated or non allowable business expenses have been claimed, resulting in interest and penalties on the extra tax for that year and sometimes previous years and a higher tax rate. Avoid extra taxes, interest and penalties with these top self employed tax questions.
What is Business Turnover?
Sales turnover is the amount the business earns before deducting business expenses including receipts of any kind for goods sold or work done such as commission, tips, payments in kind, fees and insurance proceeds. The turnover to be included in your financial accounts is the date it was invoiced or earned and not the date it was received.
What is excluded from Business Turnover?
Sales turnover excludes sales of fixed assets such as premises, vehicles and plant and equipment. Also exclude business start up allowances which are entered separately on the self assessment tax return. Money introduced to the business is excluded being capital introduced and not sales turnover.
What business expenses are allowable?
All running costs incurred solely for the purpose of the business may be deducted as allowable business expenses including goods bought for resale, employee wages, premises rent and overheads, administration costs, vehicle running costs. Interest on loans and overdrafts can be claimed as business expenses excluding the capital element of repayments. Higher business expense levels accurately recorded can keep taxable profit below the higher tax rate.
Can the cost of buying and repairing plant and machinery be claimed?
Repairs and maintenance costs are allowable business expenses. The purchase cost including improvements and replacement costs are not allowable business expenses, these costs being subject instead to capital allowances. Depreciation is not allowed and replaced by Capital Allowances for the purposes of calculating the tax payable.
What are Capital Allowances?
Capital allowances are designed to write off the cost of purchasing a fixed asset over the life of the asset rather than in the financial year in which it was purchased. Capital allowances on the majority of assets are based upon a higher rate of allowance in the year of purchase, First Year Allowance with the balance of the cost being written off at a lower rate, Writing Down Allowance. The full cost of any asset may be claimed as an expense in the year it is sold or scrapped less the total of accumulated capital allowances that have been claimed against taxable profits. Any sales proceeds over and above the written down value after Capital Allowances is added back to net profits and becomes taxable. Cars are subject to writing down allowances but not First Year Allowances unless they are classed as commercial vehicles. DIY Accounting has accounting software templates that automate the calculation of capital tax allowances.
Can expenses incurred for both business and personal purposes be claimed?
No. HMRC only allow such expenses if the business expenses element of the cost can be separated from the personal element. If you claim the travelling expenses to buy business goods they can be claimed for tax purposes but would be disallowed if you also showed evidence of personal items being purchased on the same journey. Using your home phone is an allowable business expense if you claim specific identified business calls in which case you would also be able to claim a similar proportion of the rental cost.
Can vehicle costs be claimed when that vehicle is also used for personal use?
Vehicle running costs and expenses such as fuel, excise duty, insurance, repairs and breakdown membership may be claimed as business expenses if the vehicle is used solely for business purposes. Travel from home to work is not business use and disallowed. Vehicle running costs, and capital allowances on vehicles, are split between claimable costs and a disallowed cost depending on the proportion the vehicle is used for business and personal use. Parking fees for business purposes may be claimed, parking fines and penalties for motoring expenses are not claimable as business expenses for tax purposes.
An alternative to claiming vehicle running costs and vehicle capital allowances would be to claim mileage allowances which at the time of writing are 40p for the first 10,000 miles and 25p per mile thereafter.
Can Business trips be claimed?
Travelling expenses and modest lunch expenses may be claimed. Hotel and reasonable costs of subsistence may also be claimed. A subsistence allowance can be claimed if staying with friends or family as an alternative to an hotel. The cost of lunch may not be allowed when staying away overnight. Lunch with clients is regarded as entertainment and is not allowed. If you are accompanied on a business trip by family only your cost is allowable and specifically only if the trip was purely for business purposes. Expenses on combined business and personal trips are not allowed to be deducted as business expenses on tax returns.
Can home costs be claimed?
If part of your home is identifiable as solely for business purposes then running costs can be claimed. The cost allowed is the proportion of the total area of the home the business area occupies. For example, excluding shared facilities of kitchen and toilet if the home has three bedrooms, living and dining room and one bedroom is used solely as an office then 1/5 of home costs could be claimed. The costs to claim would be heat and light, insurance, general and water rates and mortgage interest excluding repayment amounts. Where mortgage interest is claimed the revenue might also claim as a capital gain the increase in value of that proportion of the home, such Capital Gains Tax being subject to tapering relief over time.
How do I treat business goods taken for my own use?
Any business goods taken for personal use should be added to sales at normal selling prices including items supplied to family and friends at less than normal prices. The cost of providing services for family and friends is not allowable as a business expense.
Can I deduct my salary or drawings as a business expense?
You cannot deduct your own wages, personal national insurance or drawings from the business as a business expense as these are distributions of the business income after net taxable profit has been calculated and not allowable expenses before tax.
Can I deduct my partner’s wages?
Yes partner’s wages can be deducted as a business expense although there are rules which would be applied in such circumstances to ensure the amount paid is both real and reasonable. The business would need to operate a PAYE scheme for that employee, deducting income tax and national insurance, the work carried out must be real not invented and the rate paid reasonable for the nature of the work and the time spent. Evidence may also be required that the amounts were actually physically paid to that partner, for example in the form of a check.
Should Tax Credits be included?
No these are excluded from business profits although the level of credit received may subsequently be changed in the light of the actual business profit earned compared with the amount declared when the Tax Credit was applied for. HMRC do check that the net taxable profit shown on the tax return is the same as that declared when the Tax Credit was claimed.
Can I claim expenditure incurred prior to trading commencing?
Yes business expenses incurred up to seven years prior to trading commencing can be claimed. The actual date of the expenditure should be recorded although all pre-trading expenditure is treated as having been incurred on the first day of trading.
Are pool cars taxable?
Company cars are taxable as a taxable benefit while pool cars are not taxable. To qualify as a pool car, private use should be incidental to business use, the vehicle should not normally be kept at the employee’s home and the vehicle must be available and used by more than one employee.
DIY Accounting Self employed
Accounting Software templates for self employed business
|
7 Tax Tips for the Self-Employed
These “Seven Tax Tips” are excepted from the new 8th Edition of 422 Tax Deductions for Businesses and Self Employed Individuals.
Taxes Deductions on Mileage
How Home Offices and Self-Employed Can Save Even More on Taxes. Tips for little-known tax breaks you might be overlooking. Consult with your accountant or a tax professional to be sure you are meeting your state’s tax codes and any [...]
HIDDEN TAX TIPS FOR ENTREPRENEURS
“It doesn’t even begin to hint at all the things that a business can legitimately deduct,” says Bernard Kamoroff, a certified public accountant and author of 422 Tax Deductions for Businesses & Self Employed Individuals.
List of Self Employed Tax Deductions
I am in the middle of getting all my taxes in order and thought I would write up a list of tax deductions that might help someone else.
About the Self-Employment Tax
One very important item to note is that the self-employment tax is independent of the Federal income tax. It is a tax in addition to the income tax. Itemized deductions and personal exemptions do not affect self-employment tax.
Tax planning for self employed
Normal deductions are allowed for self-employed individuals . Section 80C allows investments in PPF (Public Provident Fund), insurance /unit linked insurance plans, pension plans, ELSS (equity linked savings scheme) [...]
Taking Business Tax Deductions
If you’re self employed, you can also deduct the business part of interest on your car loan, state and local property tax, parking fees and tolls, even if you claim the standard mileage rate.
Hidden Tax Tips for Entrepreneurs
Are you missing tax deductions you’re entitled to? Small business owners, self-employed workers, and independent contractors can write off many legitimate business expenses immediately, reducing the amount of income on which they pay.
Affiliate Disclosure: It is advisable to assume that any mention of a product or service on this website is made because there exist, unless otherwise stated, a material connection between the product or service owners and this website and should you make a purchase of a product or service described here the owner of this website may be compensated. To learn more, please click here.
Home | Contact | About | Privacy Policy | Sitemap