The historic Tax Cuts and Jobs Act (TCJA) provides tax breaks to individuals, but also repeals or reduces certain cherished deductions. As a result, the 2017 return you file this year may be your last chance to claim these five write-offs:

1. Mortgage interest: Currently, you can deduct mortgage interest paid on a qualified residence for acquisition debt of up to $1 million and home equity debt of up to $100,000. The new law reduces the acquisition debt level to $750,000 on new loans and eliminates the deduction for home equity debt after 2017, except if the home equity loan is used to buy, build or substantially improve the taxpayer’s home that secures the loan.

2. Miscellaneous expenses: On your 2017 return, you can deduct miscellaneous expenses above 2 percent of your adjusted gross income (AGI). This includes unreimbursed employee business expenses and income-production expenses like investment and tax advisory fees. The TCJA eliminates all itemized miscellaneous deductions for 2018 and subsequent years.

3. State and local taxes: You can still deduct the full amount of your property taxes on your 2017 return, in addition to either your sales taxes or state and local income taxes. The new TCJA law effective in 2018 limits the annual deduction for state and local taxes (SALT) to $10,000.

4. Casualty and theft losses: For 2017 returns, you may deduct unreimbursed casualty and theft losses above 10 percent of your AGI, after subtracting $100 per event. The TCJA repeals this deduction, except for losses in federally declared disaster areas, beginning in 2018.

5. Moving expenses: If you moved in 2017 for job-related reasons, you may be able to deduct your moving expenses (special rules apply). However, this deduction is repealed by the new law beginning in 2018, except for expenses of active duty military personnel.
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Other tax deductions have been modified or repealed. Schedule an appointment with us to learn how the TCJA affects you situation.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

It's 2018, so it's too late to cut your 2017 tax bill…right? Wrong. If you qualify, you can deduct all or part of a contribution to a traditional IRA made before April 17, 2018 on your 2017 tax return. If you don't qualify for a deduction you may contribute to a Roth IRA instead. In that case, the contribution is nondeductible.

With either type of IRA, you can contribute up to $5,500 ($6,500 if you're age 50 or older) for the 2017 tax year.

1. Traditional IRAs: The deduction for contributions phases out if your income exceeds certain levels and you participate in a 401(k) or other employer-provided retirement plan (or your spouse participates). Distributions are generally taxable, and a 10 percent penalty usually applies to distributions before age 59½.

Contribution tip: If you file your 2017 return early enough, you can use your tax refund to fund a deductible contribution. The IRS doesn't mind as long as the IRA money is deposited by April 17.

2. Roth IRAs: The ability to contribute to a Roth IRA phases out if your income exceeds certain levels, depending on your filing status. Unlike traditional IRAs, you can never deduct Roth contributions, but distributions after age 59½ are generally exempt from tax and the 10 percent penalty.
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Although there are numerous other factors to consider, you may contribute to a traditional IRA if your goal is to reduce your 2017 tax liability, while you may prefer a Roth IRA if your goal is to secure tax-exempt payouts in retirement. No matter which approach you take, the due date for contributions for the 2017 tax year is April 17, even if you obtain a filing extension.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

​


​​Business Use of Vehicles Updated for Tax Year 2017
OVERVIEW
If you use vehicles in your small business, how and when you deduct for the business use of those vehicles can have significant tax implications. It pays to learn the nuances of mileage deductions, buying versus leasing and depreciation of vehicles. Special rules for business vehicles put in use in 2017 can deliver healthy tax savings.

The article below is accurate for your 2017 taxes, the one that you file this year by the April 2018 deadline

Some important questions

The deduction for using vehicles in your business can sometimes be significant, so it's important to make the following decisions:

• Is it better to use the standard mileage rate as your deduction or the actual expenses incurred for a vehicle used for this business?
• Who should own the vehicle? The business, the business owner or the employee?
• Should the business lease or buy the vehicle?

Here's a general overview

Business vehicles are cars, SUVs and pickup trucks that are used for business activities.
What does not qualify:

• Vehicles used as equipment, such as dump trucks
• Vehicles used for hire, such as taxi cabs or airport transport vans

Luxury Autos

Congress decided years ago that the taxpayers should not subsidize extravagant vehicles used by business. To prevent that, the law squeezes otherwise allowable depreciation deductions for “luxury cars.” But don’t think Rolls Royce or Ferrari. Congress has a much less extravagant view of luxury. For 2017, the maximum first-year depreciation write-off for a new (not used) car is $3,160 plus up to an additional $8,000 in bonus depreciation.  For a used car, the maximum first-year write-off for 2017 is a much lower $3,160. (These figures assume 100% (business use.)

The limit is higher for SUVs with loaded vehicle weights over 6,000 pounds. For such vehicles put into use in 2017, 50% of the cost can expensed using Section-179 expensing, plus another 50% of the cost that wasn't expensed under section-179 for bonus depreciation, plus another 20% of the cost leftover for regular first-year depreciation. So for a new $50,000 heavy SUV put to use in 2017 and used 100% for business, $40,000 can usually be written off in 2017.

Keep good records

The IRS is very fussy about writing off the cost of vehicles, so if you plan to take a vehicle deduction it's essential to keep a detailed log of your business miles and other expenses if you want to write them off, too. We suggest that you pick up a vehicle expense log at an office supply or stationary store and keep it in your car.

Standard mileage rate versus actual expenses

Whether to use the standard mileage rate or actual costs is a numbers game. Generally, the more economical the vehicle is to operate, the more likely it is that the standard mileage rate will give you the bigger deduction. Conversely, the higher the operating costs, e.g., gas, repairs, tires, etc. the more beneficial the actual cost method is likely to be.

Standard mileage rate

The IRS allows employees and self-employed individuals to use a standard mileage rate, which for 2017 business driving is 53.5 cents per mile.

To determine the number of miles driven for business you need two numbers for each business vehicle:

• The total number of miles driven during the year
• The total number of miles driven just for business

Tracking your total mileage for the year is easy. Write down the odometer reading on the day that you start using a vehicle for business and on the day the year ends. Business miles are the number of miles actually driven for business, for example, to visit a customer or meet a client.

Remember that any miles driven to the bank, office supply store, computer store, to meet with your accountant or to meet with your lawyer on business matters also count as part of your mileage deduction.

Some travel is not considered business-related:

• Driving from your home to your workplace and back is commuting. It's not deductible on either your business or your individual return.
• If you stop at the store on the way home from a business trip, the remaining miles from the store to home are considered personal mileage, so you can't include them.

Actual vehicle expenses

You can deduct interest on an auto loan, registration and property tax fees, and parking and tolls in addition to the standard mileage rate deduction, as long as you can prove that they are business expenses. Here’s a list of auto-related expenses you might incur.

• Gas and oil
• Maintenance and repairs
• Tires
• Registration fees and taxes*
• Licenses
• Vehicle loan interest*
• Insurance
• Rental or lease payments
• Depreciation
• Garage rent
• Tolls and parking fees*

*Also deductible if you choose the standard mileage method.

The percentage of time (based on miles) that the vehicle is used for business determines the deductible portion of these expenses.

Here's how the math works:

Let's say your gas, oil and repairs came to $3,000 for the year. Fees and taxes were $500. Loan interest and insurance were $1,500. If it's an old car, the is no depreciation write-off. Your total "actual" expenses were $5,000.

Your total mileage was 18,000 and documented business miles were 16,202. The business-use percentage is 90% (16,202 divided by 18,000).

If you use the actual expenses method, you could deduct $4500 (90% of $5,000).

If you use the standard mileage rate, your 2017 deduction would be $8,668 (16,202 x 53.5 cents). In this case, the standard mileage method gives you the bigger tax benefit.

The business-use percentage usually varies from year to year. Operating expenses are annual expenses and do not affect subsequent years.

Depreciation

This is the amount you can deduct over time for general wear and tear of the vehicle. The standard mileage rate includes an amount for depreciation and reduces the adjusted basis of the vehicle when you decide to sell or otherwise dispose of it. In the example above, it works out this way:

2017 Standard Mileage Deduction: 16,202 miles x 53.5 cents per mile = $8,668.

Equivalent Vehicle Depreciation included: 16,202 miles x 25 cents per mile = $4,050.50.

If you use the "actual" expenses method and the vehicle was acquired new in 2017, the maximum first-year depreciation deduction for 2017 is:

Type of Vehicle                                                                                                                         Deduction

Auto                                                                                                                                           $3,160

Light truck, van, or SUV built on a truck chassis                                                                $3,560

In the example above, your depreciation on a new (not used) auto would be limited to the business-use percentage of 90% times the maximum 2017 first-year allowance of $3,160, or $2,844.

Since depreciation accumulates, each year's business mileage affects the adjusted basis of the vehicle. The adjusted basis will, in turn, be used to determine the gain or loss when the vehicle is sold, so keeping good records is essential.

Note: In order to use the standard mileage method, you must choose this method in the first year the vehicle is placed in service. In later years you can choose to use the standard mileage rate or actual expenses.

The ownership dilemma

Self-employed owner (sole proprietor)

The owner can choose to use either the actual expense method or the standard mileage rate method subject to the rules outlined above.

If an employee uses a personal vehicle for business, the employer typically reimburses the employee for the business mileage incurred at the standard mileage rate. The amount received for documented business miles is not taxable to the employee and vehicle expenses are deductible by the employer.

Note: If you are a single-member LLC and file a Schedule C with your personal tax return (Form 1040), you are considered a self-employed owner for tax purposes.

S Corporation/C Corporation

A vehicle used for business may be owned by the corporation or by an employee (even a shareholder employee). The method of claiming the deduction will differ depending on the ownership of the vehicle.

Vehicle owned by employee

An employee (or a shareholder employee) who uses a personal vehicle for business can submit a request for reimbursement to the corporation, based on documented business miles. The corporation can then reimburse the employee based on the standard mileage rate for business.

In this case, the corporation gets a deduction for vehicle expenses paid, and the reimbursement is not reportable as taxable income to the employee.

If the employee has to pay his or her own expenses for travel on behalf of the corporation, the employee claims an unreimbursed employee business expense deduction as a miscellaneous itemized deduction on Schedule A of Form 1040. The employee can use the actual method or standard mileage method to calculate the deductible amount.

Vehicle owned by the corporation

A corporation must determine the deduction for vehicles it owns based on actual operating expenses. The corporation is also limited by the business-use percentage of the vehicle.

The corporation can deduct all of the operating expenses of the vehicle without regard to the business-use percentage, if the personal-use percentage is treated as income to the employee. This is typically the case when you get the use of a company car as an employee benefit. The corporation's deduction for the personal use percentage is treated as a compensation expense.

One more thing: The employee's income for personal use of a corporate vehicle is determined based on the market value of the vehicle, not on the actual expenses or standard mileage rate used to determine the deduction, for example, the cost to rent a vehicle.

Partnership/LLC

The rules are the same as an S Corporation, with one exception: A partner/member who has unreimbursed auto expenses as a requirement of the partnership/LLC agreement can claim the deduction on Schedule E of Form 1040 rather than on Schedule A.

Note: It's generally less burdensome for a business to allow an employee (even a shareholder, partner, or member) to use his or her personal vehicle and submit an expense reimbursement request. This eliminates a substantial amount of record-keeping for the employer. The tracking of business mileage cannot, unfortunately, be avoided or eliminated no matter what reporting choice you make.

Buy or lease?

The standard mileage rate can also be used for a leased vehicle. If you use the standard mileage rate, you cannot switch to the actual expense method in a later year.

If you use the standard mileage rate for a leased vehicle, the lease payment amount is not deductible.

Leased vehicles are not depreciated. Instead, the business portion of the lease payment is deducted. When the value of the leased vehicle is above a certain amount, you must also subtract an "income inclusion" amount from the deductible amount. For vehicles first leased in 2017, the threshold is $19,000. This income inclusion rule is an attempt to equalize the tax benefits from leasing and owning business vehicles.

For example, a vehicle leased in 2017 that is valued at $45,500 and that is used 100% for business would require an income inclusion amount of $54 to be subtracted from the 2017 lease payments in arriving at the deductible amount for that year.

In 2018, the income inclusion amount would be $119. Higher income inclusion amounts would apply for 2019 through 2021.

The bottom line

• Keep detailed records.
• If you drive a lot for business and have few vehicle expenses, use the standard mileage rate to determine your deduction.
• Business use of a vehicle is a legitimate deductible expense and should be claimed by the taxpayer.

The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

If you contributed to charity in 2017, you can generally deduct the full amount on your tax return with one caveat: You must have the records to back up your claims in case the IRS comes calling. If you donated money, the documentation is fairly simple. But special rules apply if you donated property or you received benefits in return for your gift.

Monetary contributions
For monetary contributions, such as gifts by check or credit and debit card, you must have a bank record or written communication from a qualified charitable organization showing the:

• Amount of the contribution
• Date of the contribution
• Name of the organization

Also, you must obtain a written acknowledgment from a charity for any gift of $250 or more.

Property contributions
Gifts of property often require extra tax return work. If the property increased in value from the day you purchased it and you've owned it for longer than a year, you can deduct the fair market value of the property on the date of the donation. Otherwise, your deduction is generally limited to what you paid for the item.

Donations of property valued above $500 require a description of the donated property attached to your return. If the gift is valued at more than $5,000, you'll need to provide an independent appraiser's summary.

If you received benefits in return for your gift
Sometimes you may make a contribution and receive a benefit in return. With these "quid quo pro" contributions, you can deduct only the difference between the contribution amount and the value of the benefit. Suppose that you and your spouse attended a fundraising dinner that cost you $200 in total. The charity states that the meals were valued at $80, so your deduction is limited to $120 ($200 - $80 = $120).
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Don't miss out on claiming the charitable donations you're entitled to deduct on your 2017 return — but be sure you have the proof you need. Give us a call if you have questions.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
​

What do you call those deductible expenses that don't fit squarely into any other category? The IRS refers to them as "miscellaneous" expenses. If you qualify, you can deduct the excess above 2 percent of your adjusted gross income (AGI) on your 2017 tax return. For instance, if your AGI for 2017 is $100,000 and you incurred $3,000 in miscellaneous expenses, your deduction is $1,000.

Under the Tax Cuts and Jobs Act (TCJA), the miscellaneous expenses deduction is suspended from 2018 through 2025. However, you can still deduct these expenses on your 2017 tax return.

The list of expenses is long and varied, but you can generally break them down into two groups: production-of-income expenses and unreimbursed employee business expenses.

1. Production-of-income expenses: This group includes fees relating to tax and financial planning and assistance. Some common items are as follows:

• Accounting, legal or tax fees to produce or preserve income
• Appraisal fees for charitable contributions and casualty losses
• Custodial fees for income-producing property and IRAs
• Fees paid to collect interest or dividends
• Hobby expenses (up to the amount of hobby income)
• Safe deposit rentals to store non-tax-exempt securities
• Tax assistance expenses for services, periodicals, manuals and other materials

Tax return tip: The cost of having your 2017 tax return prepared qualifies as a deductible miscellaneous expense.

2. Unreimbursed employee business expenses: The second group of miscellaneous expenses consists of unreimbursed employee business expenses. It includes the following items:

• Cellphones and home computers (when required for employment)
• Dues paid to professional societies
• Employment-related education
• Home office expenses as employee
• Malpractice insurance premiums
• Subscriptions to professional journals and magazines
• Travel and entertainment expenses (limited to 50% of cost of business meals and entertainment)
• Union dues
• Work clothes or uniforms

The cost of searching for employment may also qualify as a deductible miscellaneous expense, even if you don't get the job.
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This deduction is no longer available in 2018, so take advantage of it now on your 2017 tax return if you can. Questions? Call our office and we can help you.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720