Posts Tagged ‘mileage rate’

December 17: 2010 Tax Relief Act

Sunday, December 19th, 2010

Note: Much of the fol­low­ing is extracted from the Sen­ate Finance Committee’s expla­na­tion of  Reid-McConnell Tax Relief, Unem­ploy­ment Insur­ance Reatho­riza­tion and Job Cre­ation Act, which incor­po­rated the amend­ments to HR4853 that Pres­i­dent Obama nego­ti­ated with the Sen­ate and passed back to the House.  There was some debate in the house about the Estate tax, but the estate tax amend­ment was not passed.  The bill sub­mit­ted by the Sen­ate to the house appar­ently passed the house unchanged.  If it turns out that changes were made, we will update the list below with a strike through…

It is almost the end of the year and con­gress acted on some pend­ing leg­is­la­tion last Fri­day. The tax brack­ets, many tax credits, items of deduc­tion and adjust­ments to income, were tem­porar­ily extended or passed or patched through 2011 or 2012.

Estate tax.  Con­gress passed $5 mil­lion exemp­tion with a 35% tax through 2012; for the estates of 2010 dece­dents there will be a choice between no estate tax & no step up in basis for assets in excess of the $1.3 Mil­lion exempted (2010 rules) OR the $5 Mil­lion exemp­tion & 35% tax arrange­ment (estate tax rules for 2011 and 2012). 

Other items in the exten­ders bill passed by the house late Fri­day night in the 2010 Tax Relief Act:

  • The Bush era tax rates: 10, 25, 28, 33, and 35 per­cent tax rates have been extended through 2012-all would have increase otherwise.
  • The per­sonal exemp­tion phase out as well as the item­ized deduc­tion lim­i­ta­tion have been repealed through 2012. 
  • The 0 and 15 per­cent cap­i­tal gains tax rates have been extended through 2012.
  • The cur­rent child tax credit has been extended through 2012. 
  • Mar­riage penalty relief for the 15% tax bracket, EITC & the stan­dard deduc­tion has been extended through 2012.
  • The expanded child tax credit has been extended through 2012.
  • The expanded adop­tion tax credit and adop­tion assis­tance pro­grams exclu­sion has been extended through 2012.
  • The employer credit for expenses asso­ci­ated with child care assis­tance has been extended through 2012.
  • The credit for the third child with respect to EITC has been extended through 2012.
  • The expanded Coverdale sav­ings accounts have been extended through 2012.
  • The expanded Stu­dent Loan inter­est deduc­tion has been extended through 2012. 
  • The expanded exclu­sion for employer pro­vided edu­ca­tional assis­tance has been extended through 2012.
  • The tem­po­rary exclu­sion from income of cer­tain schol­ar­ships has been extended through 2012. 
  • Arbi­trage rebate excep­tion for school con­struc­tion bonds has been extended through 2012. 
  • Tax exempt pri­vate activ­ity for qual­i­fied edu­ca­tion facil­i­ties has been extended through 2012. 
  • Extend the Amer­i­can Oppor­tu­nity Credit through 2012.
  • Extend tax relief for Alaska Set­tle­ment funds through 2012. 
  • Two year AMT patch: In 2010 exempts $47,450 ($72,450 MFJ) from AMT, and in 2011 $48,450 ($74,450 MFJ). It also allows non refund­able per­sonal cred­its to be used against AMT.
  • Bonus depre­ci­a­tion: For prop­erty place in ser­vice between Sep­tem­ber 8,2010 and Decem­ber 31st 2011 a spe­cial 100% bonus depre­ci­a­tion maybe allowed.  For prop­erty place in ser­vice in 2012 50% bonus depre­ci­a­tion may be allowed. 
  • The Small Busi­ness Jobs Act extended/expanded sec­tion 179 through 2011.  This Act extends sec­tion 179 at the 2007 lev­els at $125,000 with a $500,000 phase out thresh­old indexed for infla­tion for 2012.
  • Emer­gency unem­ploy­ment and extended ben­e­fits have been con­tin­ued for 1 year. 
  • Dur­ing 2011 employ­ees and self-employeds will have Social Secu­rity with­hold­ing reduced by 2%.
  • The fol­low­ing cred­its have been extended through 2011: Biodiesel & Renew­able Diesel, Refined Coal, Energy-Efficient Homes, Alter­na­tive Fuels, Spe­cial rules on the sale of elec­tronic trans­mis­sion prop­erty, spe­cial rule for mar­ginal wells, Sec­tion 1603 of the Amer­i­can Recov­ery & Rein­vest­ment act, Ethanol, Energy-Efficent appli­ances, Energy-Efficient Exist­ing homes, Alter­na­tive vehi­cle refu­el­ing property. 
  • The fol­low­ing indi­vid­ual adjust­ments and cred­its have been extended through 2011: $250 above the line deduc­tion for ele­men­tary & sec­ondary school teach­ers, the deduc­tion of state & local taxes in lieu of state & local income taxes, increased con­tri­bu­tion lmi­its for appre­ci­ated real prop­erty for con­ser­va­tion pur­poses, above the line deduc­tion for qual­i­fied tuition and related expenses, tax-free retire­ment plan dis­tri­b­u­tions (up to $100,000)  to char­ity, estate tax look-thorugh for RIC stock  held by non­res­i­dents, par­ity for mass tran­sit benefits.
  • Refund and tax credit dis­re­gard for means test­ing has been extended through 2012. 
  • The fol­low­ing busi­ness cred­its and deduc­tions have been extended through 2011: R&D, Indian Employ­ment, New Mar­kets, Rail­road track main­te­nance, mine res­cue team train­ing, employer credit for acti­vated mil­i­tary reservists, the spe­cial 15 year recov­ery period for cer­tain retail, restau­rant & leash­old improve­ments, 7-year straight line recov­ery period for motor­sport enter­tain­ment com­plexes, accel­er­ated depre­ci­a­tion of prop­erty on an Indian reser­va­tion, enhanced char­i­ta­ble deduc­tion for food inven­tory, enhanced char­i­ta­ble deduc­tion for con­tri­bu­tion of book inven­tory to pub­lic schools, enhanced char­i­ta­ble deduc­tion of com­puter equip­ment for edu­ca­tional pur­poses, elec­tion to expense advanced mine safety equip­ment, exten­sion of spe­cial rules for US films and TV show pro­duc­tions,  expens­ing envi­ro­men­tal reme­di­a­tion, DPAD in Puerto Rico, spe­cial rules for cer­tain pay­ments made to an tax-exempt entity from a con­trol­ing entity, spe­cial treat­ment of cer­tain div­i­dends of RICs, exten­sion of treat­ment of cer­tain RIC as Qual­i­fied Invest­ment Enti­ties under FIRPTA, the active financ­ing excep­tion, look-though treat­ment of related for­eign con­trolled cor­po­ra­tions, pro­vi­sion that allows S-Corporation share­hold­ers to take into account their pro-rata share of char­i­ta­ble con­tri­bu­tions even if the deduc­tion exceeds the shareholder’s basis in the cor­po­ra­tion, Empow­er­ment Zones, DC Enter­prise Zone, Amer­cian Samoa econ­mic devel­op­ment credit, Work Oppor­tu­nity Tax credit, exten­sion and increased autho­riza­tion for qual­i­fied zone acad­emy bonds, Pre­mi­ums for mort­gage insur­ance ded­cutible as inter­est that is qual­i­fied res­i­dence inter­est, extend the 100% exclu­sion of cer­tain small busi­ness stock acquired in 2011 and held for more than 5 years.
  • NY Lib­erty Zone bonds issue extended through 2011
  • Credit for reha­bil­i­tat­ing his­toric build­ings in the GO Zone extended through 2011
  • Credit for GO Zone low income hou­se­ing placed in ser­vice through 2011.
  • GO Zone bonds issue extended through 2011
  • 50% depre­ci­a­tion allowance for GO Zone busi­ness prop­erty placed in ser­vice through 2011

The pre­ced­ing list was what was in the bill the Sen­ate passed to the house on Decem­ber 15, 2010.  The bill sub­mit­ted by the Sen­ate to the house appar­ently passed the house unchanged. 

Expanded Infor­ma­tion Report­ing: Repeal of the expanded infor­ma­tion report­ing is not likely to happen-the bill intro­duced by Sen­a­tor Bac­cus of Mon­tana to do that very thing was soundly voted down.  The IRS has a year to work out the wrin­kles before this infor­ma­tion report­ing actu­ally begins, so there will be more guid­ance coming.  For more infor­ma­tion on this topic read here.   

The fol­low­ing items were NOT EXTENDED

  • The increase stan­dard deduc­tion for prop­erty taxes. 
  • The waiver of Required Min­i­mum Distributions
  • Mid­west­ern dis­as­ter relief
  • Hope & Life­time learn­ing tax cred­its — they have been replace by the Amer­i­can Oppor­tu­nity Credit

Small Busi­ness Jobs Act: There has been some activ­ity with respect to cer­tain busi­ness cred­its and deduc­tion ear­lier in the year with the Small Busi­ness Jobs Act; you can read about the impli­ca­tions of that act here.

The Busi­ness Mileage rate for 2011 has been announced: 51 cents per mile, med­ical and mov­ing mileage is still 19 cents per mile and char­i­ta­ble mileage is still 14 cents per mile.

Paid Tax Pre­parer Over­sight: Remem­ber start­ing in 2011 all paid tax pre­par­ers must have a Pre­parer Tax Iden­ti­fi­ca­tion Num­ber (PTIN).  All Tax Return Pre­par­ers are now sub­ject to the over­sight of the Trea­sury Depart­ment.  All indi­vid­u­als who pre­vi­ously had a PTIN issued have to renew their PTINs with the IRS before prepar­ing any tax returns in 2011.  Fur­ther­more tax pre­par­ers who file more than 100 tax returns per year will need to obtain an EFIN as they will be required to e-file all tax returns.

As always, small busi­ness ser­vices and tax­a­tion are our busi­ness.  If you need help Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client. 

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in. The con­tent of this blog gen­er­ally applies to busi­ness and indi­vid­ual tax­a­tion in the United States of Amer­ica.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant, human resource spe­cial­ist, cer­ti­fied finan­cial plan­ner or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice. Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to anyone else.

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Posted in Business Taxes, Individual Taxes | 5 Comments »

We’re Back

Sunday, January 10th, 2010

Sorry to have fallen off the Blog Planet for so long.  It was the hol­i­days and we at ABC LLC were liv­ing life instead of writ­ing busi­ness blogs.  We hope you had a good time with your friends and fam­ily as well.  Any­way, it is a Happy New Year with a whole raft of new things to think about in terms of tax­a­tion, busi­ness, employ­ees etc.

First off, the Stan­dard Mileage rate decreased in 2010.

  • Busi­ness mileage is now 50 cents per mile.
  • Relo­ca­tion and med­ical mileage are now 16.5 cents per mile.
  • Char­i­ta­ble mileage remains unchanged at 14 cents per mile.

As always the stan­dard mileage rate can only be used if the tax­payer leases/owns a pas­sen­ger auto, van, pickup truck or panel truck not used for hire, which was not depre­ci­ated under ACRS, MACRS or sec­tion 179 in ear­lier years.

Employee with­hold­ing has risen.  The Mak­ing Work Pay Tax Credit con­tin­ues, but in 2010 it is spread over the entire 12 months of the year unlike 2009. In addi­tion the IRS added two wage brack­ets to the 2010 tax tables:

  • Single/Head of House­hold:  0%, 10%, 15%, 25%, 27%, 30%, 28%, 33%, 35%
  • Mar­ried: 0%, 10%, 15%, 25%, 27% 25%, 28%, 33%, 35%

Wage brack­ets are not tax brack­ets, wage brack­ets are used to fig­ure fed­eral with­hold­ing tax. There are still only 6 tax brack­ets which dif­fer for Mar­ried, Sin­gle and Head of House­hold; they are slightly wider than 2009, but the tax per­cent­age for each bracket remains the same as 2009.

Even as you are prepar­ing to put 2009 behind you, you should know that Con­gress did not reau­tho­rize dozens of tax breaks for indi­vid­u­als and busi­nesses before the mem­bers went home for the home the hol­i­days; how­ever sev­eral mem­bers of con­gress have vowed to restore them and make them retroac­tive to Jan­u­ary 1, 2010-but as of today that has not hap­pened.  By allow­ing these tax breaks to lapse, Con­gress has essen­tially enacted tax increases.  Some of the 50 Tax Breaks That Expired:

  • Bonus 50% Depre­ci­a­tion for busi­ness equip­ment purchases
  • Increased limit on sec­tion 179 expens­ing of busi­ness equip­ment goes from $250K to $125K and the increased annual limit on pur­chase eli­gi­ble for sec­tion 179 goes from $800K to $500K
  • Above the line deduc­tion for qual­i­fied tuition and related expenses $4,000
  • Above the line deduc­tion for the qual­i­fied expenses of ele­men­tary and sec­ondary school teach­ers $250
  • 15-year straight-line recov­ery period for qual­i­fied lease­hold improve­ments, qual­i­fied restau­rant improve­ments, and cer­tain improve­ments to retail space.
  • Cor­po­rate char­i­ta­ble con­tri­bu­tions for com­puter tech­nol­ogy, food inven­tory and books
  • Con­tri­bu­tions of cap­i­tal gain real prop­erty for con­ser­va­tion purposes
  • Tax-free treat­ment of qual­i­fied char­i­ta­ble dis­tri­b­u­tions made from IRAs for those over age 70 ½
  • Waiver of 2009 min­i­mum required dis­tri­b­u­tion rules for IRAs and defined con­tri­bu­tion plans
  • Basis adjust­ment to stock when S-corporation makes char­i­ta­ble con­tri­bu­tions of property
  • Deduc­tion of state and local gen­eral sales taxes
  • Addi­tional stan­dard deduc­tion, up to $500 for indi­vid­u­als and $1,000 for cou­ples, for state and local prop­erty taxes
  • For 2010 Repeal of over­all lim­i­ta­tion of item­ized deduc­tions. In 2009, the lim­i­ta­tion was reduced to 1/3 of what it would oth­er­wise have been.
  • The Work oppor­tu­nity credit for hir­ing qual­i­fied vet­er­ans and youth
  • Research tax credit and alter­na­tive sim­pli­fied credit
  • New mar­kets tax credit
  • Empow­er­ment zone incentives
  • Renewal com­mu­nity tax incentives
  • Dis­trict of Colum­bia Invest­ment Incentives
  • Alter­na­tive fuel mix­ture tax credit
  • Net dis­as­ter loss des­ig­na­tion and $500 limit per casu­alty for per­sonal casu­alty losses attrib­uted to fed­er­ally declared nat­ural disasters
  • Expens­ing for qual­i­fied dis­as­ter expenses
  • Biodiesel and renew­able diesel incentives
  • Alter­na­tive motor vehi­cle credit for heavy hybrids
  • Increased exemp­tion lev­els for the indi­vid­ual alter­na­tive min­i­mum tax and per­sonal tax cred­its allowed against the AMT
  • Exclu­sion of unem­ploy­ment com­pen­sa­tion ben­e­fits from gross income
  • Reduced esti­mated tax pay­ments for small businesses
  • Sub­part F rules for multi­na­tion­als affects how U.S. share­hold­ers can be taxed on cer­tain income that a com­pany earns abroad.
  • Look-through rules for multi­na­tion­als pro­vi­sion exempts some of that income, includ­ing div­i­dends paid to share­hold­ers, from being taxed in the U.S.
  • 7-year straight line cost recov­ery period for motor­sports enter­tain­ment complexes
  • Railroad-track main­te­nance credit,
  • Spe­cial expens­ing rules for U.S. film and tele­vi­sion productions
  • tax laws that help Puerto Rican and U.S. Vir­gin Islands distillers
  • Expens­ing of brown­fields (sites con­t­a­m­i­nated by haz­ardous waste) envi­ron­men­tal reme­di­a­tion costs.  Also exclu­sion of gain on the sale or exchange of cer­tain brown­field sites from unre­lated busi­ness tax­able income.
  • Mine res­cue team train­ing credit and elec­tion to expense advanced mine safety equipment.
  • Employer wage credit for acti­vated mil­i­tary reservists.
  • Five-year depre­ci­a­tion for farm­ing busi­ness machin­ery and equipment.
  • Spe­cial rules for for­eign share­hold­ers of reg­u­lated invest­ment companies.
  • Spe­cial rule for per­cent­age deple­tion for mar­ginal wells.
  • Exten­sion of spe­cial tax treat­ment of cer­tain pay­ments (inter­est, rents, roy­al­ties and annu­ities) to con­trol­ling exempt organizations.
  • Indian employ­ment credit.
  • Accel­er­ated depre­ci­a­tion for busi­ness prop­erty on an Indian reservation
  • Amer­i­can Samoa eco­nomic devel­op­ment credit.
  • Spe­cial rule for sales of elec­tric trans­mis­sion property.

We attempted to find the com­plete list of the 50 Tax Breaks That Expired, but were unable to.  Sev­eral of the breaks listed above refer to more than one part of the tax code so they may encom­pass more than one tax break. Sources vary so it is pos­si­ble one or more of the items on this list have been addressed by Con­gress since the source was writ­ten (the old­est record used was Decem­ber 8th).  Although Con­gress is likely to reau­tho­rize many of these tax breaks before the end of 2010, they may take a while to do it-recall it took Con­gress until Octo­ber in 2008. The expired tax breaks incon­ve­nience tax­pay­ers who will have to decide whether to plan for their tax sit­u­a­tion as it exists now, or risk a tax bill or other unplanned expenses while they roll the dice in hopes that Con­gress will retroac­tively reau­tho­rize their favorite tax break provision.

This list does not include of sev­eral items set to expire at the end of 2010, which have their own tax impli­ca­tions.  Most notable among the breaks set to expire at the end of 2010 are the repeal of the estate tax in 2010, as well as reduced cap­i­tal gains and div­i­dends rates.  Of course you can’t plan to die this year, but you may want to look at your invest­ments with an eye toward pos­si­ble tax increases in 2011.

As always, small busi­ness ser­vices and tax­a­tion are our busi­ness.  If you need help Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice.  Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.

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Posted in Business Taxes, Individual Taxes | 1 Comment »

Deducting Business Use Passenger Vehicles

Sunday, September 13th, 2009

Many busi­ness men and women use their own per­sonal car, truck or van for their busi­ness.  Oth­ers have put their per­sonal vehi­cle in their busi­ness’ name.  Still oth­ers have a  fleet of pas­sen­ger vehi­cles for the use of their busi­ness.  Pas­sen­ger vehi­cles are listed prop­erty which requires spe­cial doc­u­men­ta­tion of busi­ness use.  As listed prop­erty pas­sen­ger vehi­cles place in busi­ness ser­vice have one thing in com­mon, the busi­ness owner or employee who uses the vehi­cle needs to keep a log doc­u­ment­ing busi­ness use, verses com­mut­ing and per­sonal usage so that the fed­eral deduc­tion for auto­mo­bile expenses of the busi­ness use of the vehi­cle can be determined.

In cer­tain cir­cum­stances when the vehi­cle has been con­verted in a very spe­cific way such that it can only be used for busi­ness pur­poses a log need not be kept, but merely slap­ping a mag­net with the busi­ness’ name on the side of the car will NOT elim­i­nate the need for the log­book. Ambu­lances, hearses and vehi­cles for hire do not require the logbook.

What is a pas­sen­ger vehi­cle? Pas­sen­ger vehi­cles are defined as any four-wheeled vehi­cle (includ­ing a truck or van) that is made pri­mar­ily for use on pub­lic streets, roads, and high­ways.  Its unloaded gross vehi­cle weight (gross vehi­cle weight in the case of a truck or van) must not be more than 6,000 pounds. Vehi­cles that weigh more than 6,000 pounds are not con­sid­ered pas­sen­ger vehi­cles, but trucks and SUVs that exceed this weight do have their own lim­i­ta­tions for deduc­tions (not dis­cussed in this blog).

Why is a mileage log required? Non busi­ness use of a pas­sen­ger vehi­cle is not deductible for tax pur­poses; non busi­ness uses includes mileage of going to and from home to the place of busi­ness, such mileage is called com­mut­ing mileage. An employee’s non busi­ness use of a business-owned pas­sen­ger vehi­cle is con­sid­ered a tax­able fringe ben­e­fit to the employee.   If a busi­ness does not keep the mileage log the IRS may dis­al­low ALL of the vehicle’s expenses, which is gen­er­ally a bad thing, so, keep and reg­u­larly update the mileage log.

What does a mileage log need?

  • Mileage at the start of the year and mileage at the end of the year such that the total mileage on the vehi­cle can be figured.
  • Date of each busi­ness trip.
  • Mileage at the start and the end of each busi­ness trip so that the total mileage of each trip can be figured.
  • Busi­ness pur­pose served by the trip: where the dri­ver was going and why they were going there.
  • The log entries need to be made at or near the time of the busi­ness trip.
  • The log needs to be a writ­ten log.
  • Like all busi­ness receipts the busi­ness and/or employee needs to keep the writ­ten record with their tax records.

A small note­book can accom­mo­date this infor­ma­tion. Afford­able mileage log books can may also be pur­chased at most office sup­ply stores for a few dol­lars. In gen­eral it is best if the log book stays in the vehi­cle so that the mileage can be imme­di­ately noted.

Keep receipts for actual vehi­cle expenses. A busi­ness and/or employee of the busi­ness should also keep receipts doc­u­ment­ing ALL expenses relat­ing to the use of the pas­sen­ger vehi­cle, such as gas, oil, main­te­nance, insur­ance, lease pay­ments, garage rental, etc.

Fig­ur­ing the Auto­mo­bile Expense Deduc­tion. At tax time add up all the busi­ness use mileage.  Fig­ure the total mileage on the year.  The ratio of busi­ness mileage to total mileage is used to fig­ure the deductible per­cent­age of the actual expenses relat­ing to the busi­ness use of the vehicle.

Using the Mileage Rate Deduc­tion. Alter­na­tively, the busi­ness may use the mileage rate deduc­tion if that is the method they used when they first placed the vehi­cle in busi­ness ser­vice, how­ever if sec­tion 179 or MACRS depre­ci­a­tion is taken, the mileage rate deduc­tion my not be used there­after.  If 5 or more vehi­cles are used at the same time, the mileage rate deduc­tion may not be used.  If the vehi­cle is used for hire the mileage rate deduc­tion may not be used.  The mileage rate deduc­tion is merely a cents per busi­ness mile cal­cu­la­tion.  In 2009 the mileage rate is 55 cents per busi­ness mile dri­ven.  If the mileage rate is used to fig­ure the auto­mo­bile expense deduc­tion the busi­ness may NOT deduct the actual expenses: gas, oil, main­te­nance, insur­ance etc.  How­ever park­ing and tolls and the busi­ness per­cent­age of very few other actual expenses such as per­sonal prop­erty taxes asso­ci­ated with that vehi­cle can be taken in addi­tion to the mileage rate deduction.

Depre­ci­a­tion: Depre­ci­a­tion is a way of tak­ing the auto­mo­bile expense asso­ci­ated with the pur­chase price of a pas­sen­ger vehi­cle over time; in gen­eral the busi­ness may not take the total cost of acquir­ing the vehi­cle in the year of pur­chase as an auto­mo­bile expense. The accel­er­ated depre­ci­a­tion of a pas­sen­ger vehi­cle under MACRS (IRS required method of depre­ci­a­tion) may not be taken when the vehi­cle busi­ness mileage is less than 50% of the total mileage, the straight-line method ADS (another required IRS method) must be used. If MACRS is used ini­tially and busi­ness use drops below 50% before the vehi­cle is fully depre­ci­ated, the busi­ness may have to give back some of the accel­er­ated depre­ci­a­tion taken in prior years.  Depre­ci­a­tion may not be taken if the busi­ness is using the mileage rate to fig­ure their auto­mo­bile expense deduc­tion. For a pas­sen­ger vehi­cle placed in busi­ness ser­vice in 2009 the depre­ci­a­tion limit (includ­ing sec­tion 179) is $2960, $3160 for trucks and vans.  If the vehi­cle qual­i­fies for the spe­cial depre­ci­a­tion the the depre­ci­a­tion lim­its are $10960 for autos, $11160 for trucks and vans.  Remem­ber this depre­ci­a­tion is the max­i­mum allowed, but the max­i­mum depre­ci­a­tion allowed is reduced by the per­cent­age of busi­ness use.

So keep a mileage log and keep your receipts.

If you require assis­tance with your busi­ness taxes or other busi­ness ser­vices, that is our busi­ness.  Please give Art & Busi­ness Con­sult­ing a call. We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in.   Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice. Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.

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