Summertime Tax Tips

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Charitable Deductions

Summertime means cleaning out those often neglected spaces such as the garage, basement, and attic for many of us. Whether clothing, furniture, bikes, or gardening tools, you can write off the cost of items in good condition donated to a qualified charity. The deduction is based on the property's fair market value. Guides to help you determine this amount are available from many nonprofit charitable organizations.

Charitable Travel

Do you plan to travel while doing charity work this summer? Some travel expenses may help lower your taxes if you itemize deductions when you file next year:

  1. You must volunteer to work for a qualified organization. Ask the charity about its tax-exempt status.
  2. You may be able to deduct unreimbursed travel expenses you pay while serving as a volunteer. You can’t deduct the value of your time or services.
  3. The deduction qualifies only if there is no significant element of personal pleasure, recreation or vacation in the travel. However, the deduction will qualify even if you enjoy the trip.
  4. You can deduct your travel expenses if your work is real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.
  5. Deductible travel expenses may include:
    • Air, rail and bus transportation
    • Car expenses
    • Lodging costs
    • The cost of meals
    • Taxi fares or other transportation costs between the airport or station and your hotel

Renting Your Vacation Home

A vacation home can be a house, apartment, condominium, mobile home or boat. If you rent out a vacation home, you can generally use expenses to offset taxable income from the rental. However, you can't claim a loss from the activity if your personal use of the home exceeds the greater of fourteen days or 10% of the time the home is rented out. Watch out for this limit if taking an end-of summer vacation at your vacation home.


Buying New Equipment

Two key tax incentives for acquiring qualified business property have either expired for property placed in service in 2014 or have been greatly reduced. The additional first year “bonus” depreciation provision for qualified property expired at the end of 2013 and is not currently available for business equipment purchased in 2014.

The election to expense the cost of qualifying property under Section 179 is still available for property placed in service in 2014, but the deduction is limited to $25,000 of qualifying property, as long as the qualifying property placed in service by the business during the year is $200,000 or less. The deduction is reduced dollar for dollar as the amount of qualifying property placed in service in 2014 exceeds $200,000 and is completely phased out if the amount of qualifying property placed in service during the year exceeds $225,000.

The Section 179 election to deduct the cost of equipment placed in service during a year has been one of the most useful tax deductions available for small business. The Senate Finance Committee approved the Expiring Provisions Improvement Reform and Efficiency Act of 2014 on April 3, 2014, which extends the $500,000 Section 179 limit of recent years for tax years 2014 and 2015. It also allows businesses to use Section 179 to deduct the cost of off-the-shelf software and the costs of improvements to certain leased business properties. At this time, it is unclear whether this bill will be passed by Congress and signed by the President before December 31, 2014.

Traveling for Business

When you travel away from home, you may deduct your travel expenses – including airfare, train, bus, taxi, meals (generally limited to 50%), lodging – as long as the primary purpose of the trip is business-related. You might have some downtiem relaxing, but spending more time on business activities is critical. Note that the cost of personal pursuits is not deductible.

Entertaining Clients

If you treat a client to a round of golf at the local club or course, you may deduct qualified expenses – such as green fees, club rentals, and 50% of your meals and drinks at the nineteenth hole – as long as you hold a "substantial business meeting" with the client before or after the golf outing. The discussion could take place a day before or after the entertainment if the client is from out of state. For information on what does and does not qualify,please contact us.

Using Your Home Office

Home office expenses are generally deductible if part of a business owner's personal residence is used regularly and exclusively as either the principal place of business or as a place to meet with patients, customers or clients. The IRS recently provided an optional safe-harbor method that makes it easier to determine the amount of deductible home office expenses. Starting in 2013, the new rules allow you to deduct $5 per square foot of home office space (up to 300 square feet). In addition, deductions such as interest and property taxes allocable to the home office are still permitted as an itemized deduction for taxpayers using the safe harbor.

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