Now that the kids are back in school, you may have the itch to return to the classroom yourself, perhaps to brush up on certain skills in your field or expand your horizons. Can you deduct the cost of business education? It depends. Generally, you can deduct business expenses only if one of these two requirements is met:
That sounds simple enough, but there are also a couple things that can disqualify you for the deduction. First, if the education is required to meet the minimum educational requirements of your trade or business, then you are expected to pay that cost as a normal part of doing business — and without a tax break. Second, if the education qualifies you for an entirely new trade or business, then you also don't get to use the deduction. It's the second caveat that often trips up taxpayers. For instance, if a nurse starts taking courses that will result in a degree as a physician, the courts have said that the education expenses can't be deducted because it qualifies the nurse for a new line of work. If you qualify for the deductions Assuming you do qualify, you may deduct expenses like tuition, books, laboratory fees, equipment and transportation between work and school. Typically, the cost of the trip is deductible if you go straight to class after work. You can't write off travel costs if you stop at home for a snack or to change into more comfortable clothes, however. When you pay business education costs out your own pocket, the expenses are deductible as miscellaneous expenses, subject to a floor of 2 percent of adjusted gross income (AGI). However, if your company reimburses you, payments are generally deductible in full by the company and tax-free to you. Alternatively, an employer may establish an educational assistance plan (EAP) that provides up to $5,250 in annual tax-free benefits to each participant. "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 info@monarchaccountinggroup.com. For more free resources, such as Online Advisor Newsletters, 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
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Now that 2018 models are in the showrooms, you may be shopping for a new car for your business. Be aware that you can use one of two methods, the actual expense method or the standard mileage rate, to deduct business auto expenses (other special rules apply to leased car deductions). Although the actual expense method is more work, it could provide a bigger deduction. Here's a quick recap:
Which mileage rate is best for you depends on your situation. We can help you do the math to find the best tax result. "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 info@monarchaccountinggroup.com. For more free resources, such as Online Advisor Newsletters, 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 Suppose you need to borrow money in a hurry and your only obvious option is a bank loan with sky-high interest — if you can even obtain one. Consider an unusual source: your 401(k) plan or IRA. These accounts are meant to provide income for retirement, so they should not be "raided" without good reason. As a last resort, however, a 401(k) or IRA could provide the funds you desperately need. With an IRA, you can take out the money without restraint, because it's yours to do as you wish. But you can only withdraw funds from a 401(k) with your employer's approval (if it's even permitted). The list of reasons you can make a hardship withdrawal includes:
There are several exceptions to the 10 percent penalty that may or may not align with the reasons for hardship withdrawals. For instance, you might be able to avoid the penalty on early distributions from a 401(k) to pay emergency medical expenses, but not to pay your child's college tuition for the upcoming school year. A hardship withdrawal is typically never someone's first choice, but sometimes it's the last option. Consider all your other options before moving ahead with a hardship withdrawal. Call us today if you'd like talk about your options. "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 info@monarchaccountinggroup.com. For more free resources, such as Online Advisor Newsletters, 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 Are you upgrading the offices or work space of your small business? This may be an opportunity to make improvements to accommodate individuals with disabilities (including your own employees and visitors to the business premises) if you haven't done so already. These accommodations are legally required for larger businesses. The improvements may be pricey, but there's a potential tax payoff. Benefits of the Disabled Access Credit If your small business qualifies under a special tax law provision, it can claim the Disabled Access Credit for half the cost. Specifically, the credit is available for making the business premises more accessible to disabled individuals. A "qualified small business" is one that had gross receipts of $1 million or less or didn't employ more than 30 full-time employees in the preceding tax year. The credit is essentially equal to 50 percent of the first $10,000 of qualified expenses. (Technically, the first $250 of expenses is excluded from the calculation, but then the credit applies to the first $10,250 of expenses.) That means the maximum credit a qualified small business can claim in a given year is $5,000. Any excess may be carried back for one year and forward for up to 20 years. The expenses need to be incurred to meet requirements established by the federal law protecting individuals who are disabled. Typically, the credit is claimed for costs related to:
Finally, the disabled access credit is claimed as part of the general business credit on the tax return of your small business. Remember that a credit is more valuable than a deduction because it reduces tax liability on a dollar-for-dollar basis. "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 info@monarchaccountinggroup.com. For more free resources, such as Online Advisor Newsletters, 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 A couple can claim the Child and Dependent Care Credit — commonly called the "child care credit" for short — if they pay someone to watch the kids while they're at work. But suppose one spouse plans to go back to school this fall. Can you still claim the credit? It depends. Generally, the credit is equal to 20 percent of the first $3,000 of qualified expenses related to caring for one child under age 13, or $6,000 for two or more children underage 13. Therefore, your maximum credit is typically $600 for one child and $1,200 for two or more children. A higher percentage is available for certain low-income taxpayers. What expenses qualify for the child care credit? The credit can be claimed for:
To qualify, the expenses will need to have been incurred for you and your spouse to be "gainfully employed." A married couple is gainfully employed if one spouse works full time and the other works full time, part time or is a full-time student. A full-time student attends classes for at least five months (not necessarily consecutive) out of the year. Say your spouse took a four-week course earlier this year and now has enrolled full time at college, beginning in September. You'll end up with child care costs because your spouse will be at school and you work full time. That means you might claim the child care credit, subject to the usual limits. One more thing to remember — the qualified expenses are further limited to the earned income of the lower-earning spouse. This could affect couples where one spouse attends school. During the months a spouse is a full-time student, the tax law presumes an earned income of $250 for one child and $500 for two or more children. "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 info@monarchaccountinggroup.com. For more free resources, such as Online Advisor Newsletters, 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 Most investors face a 15 percent tax rate on long-term capital gains. This increases to 20 percent for people at the top of the ordinary income bracket (39.6 percent). That's not too bad, considering the higher tax rates on regular income. But did you know that long-term capital rates are reduced to 0 percent in certain situations? This means you might be able to benefit from a reduced tax rate on your profits on the sales of assets. How to qualify for 0% capital gains rate Capital gains from transactions such as securities sales are taxed at ordinary income rates under a graduated rate structure. This structure ranges from 10 to 39.6 percent. However, if you've owned assets like securities for longer than a year, the maximum tax rate on a gain is 15 to 20 percent if you're at the top of the ordinary income tax bracket. Capital gains may be offset by capital losses and vice versa, so this rule applies to your net gains. On the other hand, short-term capital gains from sales of securities held a year or less are still taxed at ordinary income rates. If your capital gains fall within the parameters of the 10 to 15 percent ordinary income brackets — the two lowest brackets — the maximum tax rate on a long-term gain is 0 percent. This often benefits low-income investors (ex. young investors), but it can also favor adults during a year when their other income is low. Here's an example of how it could work: you file jointly and an S corporation loss reduces your taxable income to $65,900 this year. The upper dollar threshold for the 15 percent tax bracket for joint filers is $75,900. So, if you realize a $10,000 long-term capital gain in 2017, the entire gain is taxed at the 0 percent rate. Keep this helpful tax break in mind when planning year-end securities transactions. The 0 percent tax rate might just help you hold on to more of your profits. Give us a call if you have questions about your year-end planning. "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 info@monarchaccountinggroup.com. For more free resources, such as Online Advisor Newsletters, 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 As the end-of-year holidays approach, you may decide to be extra generous to your loved ones. Specifically, by giving your family members gifts that are usually sheltered by the annual gift tax exclusion. Not only does this reduce the size of your taxable estate, it can minimize the overall income tax bite for your family. How does the annual gift tax exclusion work? Under the annual gift tax exclusion, you can give each recipient cash or property valued up to $14,000 free of gift tax without eroding any of your unified estate and gift tax exemption. This exclusion is adjusted every year for inflation in increments of $1,000, but hasn't budged in recent years. The exclusion is doubled for joint gifts made by married couples. For example, suppose you have three adult children and seven grandchildren. You and your spouse could each give every child and grandchild a gift of $14,000 in December to celebrate the holidays. Then you both could give each family member another $14,000 in January. In just two months, you and your spouse could reduce your taxable estate by a total of $560,000 ($28,000 x 10 recipients x 2 years)! Normally, you don't have to file a gift tax return to benefit from the annual gift tax exclusion, but your spouse must consent to joint gifts on a return. How does the family save? Assuming you're in a high tax bracket and the recipients are in a lower tax bracket, any subsequent earnings from the cash or property you gift will result in reduced tax. Special rules come into play if you give gifts of property that have appreciated or depreciated in value. Call today if you'd like to discuss your 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, 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 info@monarchaccountinggroup.com. For more free resources, such as Online Advisor Newsletters, 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 The tax rules are relatively lenient for rollovers to a traditional IRA. For instance, if you transfer funds from your 401(k) plan to an IRA within 60 days, there's no tax liability on the transfer. Similarly, if you transfer funds from one IRA to another within the 60-day window — say, for investment reasons — you avoid tax for the current year. In effect, this gives you 60 days to use the money as you see fit. It's like getting an interest-free loan from the IRS, albeit for just two months. However, be aware of a special wrinkle. The tax law also says that you're limited to just one IRA-to-IRA rollover for the year. In a 2014 tax court case involving this once-a-year rule (Bobrow, TC Memo 2014-21), the limit was applied to all the IRAs owned by the taxpayer, not each one separately. This is different from the previous interpretation by many tax commentators and even the IRS itself. The facts in this case can be confusing, but here's all you need to know. The taxpayer argued that the one-year limit didn't apply to another IRA he owned after he completed an IRA-to-IRA rollover. The tax court disallowed his rollovers within the next 12 months. Subsequently, the IRS decreed that it would follow the court's ruling. If you're in a similar position, be aware that you can't use multiple rollovers within the same year. What happens if you violate the once-a-year rule? The transfer is treated as a taxable distribution, so you'll be taxed at your regular tax rate on the portion representing deductible contributions and earnings. What's more, you might face additional tax complications. For example, a 10 percent penalty generally applies to taxable IRA distributions made before age 59½. The best approach is to avoid potential problems by strictly observing the IRA rollover rules. Give our office a call if you have questions specific to your 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, 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 info@monarchaccountinggroup.com. For more free resources, such as Online Advisor Newsletters, 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 Does your chart of accounts reflect your current business operations? If you haven't revised your chart of accounts since you initially set it up, you may be missing out on an easy way to simplify your business's financial life. That's because your chart of accounts is more than a basic bookkeeping tool. Your chart can also help you keep track of items that affect your tax return. For example, your business income may have multiple sources, including the sale of goods and services to customers, rents, royalties, interest, dividends, gains from the sale of business and investment assets, and "miscellaneous" receipts. These different types of income are treated differently under federal income tax rules and appear in different places on your return. Arranging your income accounts for tax-specific categories can streamline tax preparation time and reduce misstatements. Expense accounts can benefit from organization too. For instance, you'll want to separate allowable deductions, such as ordinary and necessary business costs, from expenditures that produce benefits in future taxable years, such as equipment. That keeps your depreciation schedule current, highlights assets you've purchased and disposed of, and ensures proper reporting on federal, state, and local returns. In addition, some income tax deductions are based on specific business income and the related costs. The domestic production activities deduction is an example. Calculating this tax benefit requires separating income and expenses attributable to certain qualifying activities such as real property construction. Setting up your chart of accounts to capture the necessary information is a year-end time saver. Nondeductible expenses are another category that can benefit from tax-specific accounts. Those include dividends paid to shareholders, expenses associated with tax-exempt income, certain entertainment costs, and penalties and fines. Organizing your chart of accounts to accurately track business events that affect your taxes can be cost-effective. Contact us for tips on the best way to get the most benefit. "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 info@monarchaccountinggroup.com. For more free resources, such as Online Advisor Newsletters, 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 Remember that purchase you made online — the one you didn't have to pay sales tax on? Guess what? In most cases, you were supposed to pay the tax yourself, at the same rate as your state's sales tax. These consumer-assessed taxes are called "use" taxes, and they typically apply when you or your business make a purchase from an out-of-state seller that is not required to collect sales tax in your state. If the seller does not collect the tax from you, and the purchase is otherwise taxable, you're responsible for remitting use tax to the state. The idea is to keep in-state businesses from suffering a competitive disadvantage against out-of-state rivals. The result? If your state has a use tax, you generally owe the tax on most items you buy out of state and bring in state. The tax applies to purchases both large and small, and sometimes even to items such as magazine subscriptions. In practice, states have had difficulty tracking purchases and collecting use taxes from individuals. Businesses are required to report use taxes on their sales tax returns and are audited to check compliance. However, as states seek to collect more taxes without raising rates, enforcement of use tax laws could increase. Some states require you to report the use taxes you owe on your personal state tax return. Others may have reporting arrangements with neighboring states to track purchases, or they may monitor deliveries coming across state lines. Failing to pay means you could be liable for penalties and interest in addition to the unpaid tax. If you think the use tax applies to you, contact our office for information about filing requirements. "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 info@monarchaccountinggroup.com. For more free resources, such as Online Advisor Newsletters, 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 |
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