When you are traveling for business, at some point you will likely have to eat at a restaurant. Deducting the cost of your meals from taxes will make the food taste that much better. You may be able to deduct business meals, but there is a specific set of guidelines you have to follow.

According to the IRS you will have to eat no matter where you are, and because you can’t deduct home meals you also can’t deduct all business trip meals. IRS guidelines allows you to deduct 50% of food costs while traveling. There are two different ways to deduct your meal expenses. You can either itemize your actual expense or take a predetermined amount set by the IRS.

Actual Cost Deductions

When you choose to deduct the cost of the meal you have to keep records of everything spent, this includes taxes and tips. This can also include meals that you have brought or taken from your destination, as well as meals purchased at your business location. While filing your taxes you add up all food expenses and divide it in half to find out what is deductible from your expenses.

If you take a business trip and combine it with personal vacation you can only claim the meals you eat while doing business related functions, such as attending conferences or meetings.

While you don’t have to keep all of your receipts you will have to prove that the meal was consumed during normal business functions, so you should track all expenses. (more…)

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If your job or business requires you to buy a new computer you may be able to deduct the cost as a business expense. It may be possible to deduct the whole amount in a single year.

Employees

If you are employed by someone else and are required to purchase a new computer, most time your employer will reimburse you. This is because your employer can deduct the cost of the computer as a business expense. Although if your employer does not reimburse you for the cost of a new computer you may be able to deduct it. The cost will have to exceed 2% of your adjusted gross income, so if you have an AGI of $50,000 your unreimbursed employee expense will have to be greater than $1,000.

Business Owners

If you need to purchase a new computer to use in your business you can fully deduct the cost of the computer. Generally you should depreciate the cost over a five year span, but you are able to deduct the full amount in a single year.

An example of this is; an accountant who works from a home office that is used exclusively for work full time. Since the homes office qualifies for a home office deduction if the if accountant purchases a new computer for $1,000 for his business he can deduct the cost without proof or showing where he uses the computer.

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The IRS considers all same-sex couples who are legally married to be effectively married for all tax reasons, regardless of where you live in the country. Effective in 2013 all same-sex couples who are married are subject to the same tax implication as all other married couples. The IRS will consider a same-sex marriage if it was performed in the United State Puerto Rico, territories and possessions of the U.S. or any foreign county where same-sex marriage is legal. If same-sex marriage is no legal in the state which you reside, if you marriage was authorized by the government of where it took place you are legally married according to IRS standards. If you fall under such items as registered domestic partnerships, civil unions or similar relationships that fall under state laws you are not considered married and are not subject to federal tax rules.

Rules for Married Taxpayers

Regardless of sex if you are legally married you are required to file a federal tax return as either Married Filing Jointly or Married Filing Separately. Though if you and your spouse were living separately for the last six months of the tax year, and you or your spouse had possession of a dependent child or relative you may qualify for filing as Head of Household.

If you are in a same-sex marriage and previous had to file using the status of Single you now have the ability to amend prior returns prior to September 16th, 2013 to one of the status of Married. Amended returns will be subject to a statute of limitations.

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If you have a mortgage loan on your home you should expect to receive a Form 1098 Mortgage Interest Statement at tax time from your lender. Form 1098 will report the full amount of interested you paid on your load throughout the year. The lender will also send a copy of Form 1098 to the IRS as well, you are not required to file this form with your taxes. You will need to make sure any amount that you claim for mortgage interest deductions on your 1040 Schedule A matches what is noted on your Form 1098. The amount of mortgage interest you can deduct may be limited. It is advised that you retain a copy of Form 1098 for three years after you file your tax return.

Limitations to Mortgage Interest Deductions

You are limited on how much mortgage interest you can deduct each year on your taxes. Limitations are based on how you use your mortgage loan – whether if it is used to construct or build a residence. If you use a loan to obtain a home it is considered a Home Acquisition Debt, if you end up using it for other purposes it is considered Home Equity Debt. It doesn’t matter the type of loan you use or if it is backed by your first or second home, they are all subject to limitations.

Home Acquisition Debt

To be able to deduct home acquisition debt the total amount of your loan must not be greater than $1,000,000 and be either your primary or secondary residence. If you used your loan to purchase, build or improve a home you have created home acquisition debt. If you file your taxes using the status of Married Filing Separately you are subject to a reduced limit of $500,000.

Home Equity Debt

Home equity debit is considered a loan that is not used to build, purchase or upgrade a home. Your loan may also qualify if it exceeds the home acquisition debt limit but was used to improve a home significantly. You can only deduction up to $100,000 on these types of loans. If you are filing as Married Filing Separately the limit is $50,000.

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If you have earned interest during the tax year you are required to report it to the IRS. Even if the interest earned is not taxable you must file a 1099-INT with your taxes. You are not required to send copies of the 1099-INT’s that you receive as long as you report the income.

What Do the Boxes Mean?

So that you can report your interest correctly on your taxes you must understand which each box on a 1099-INT means.

  • Box 1: This box represents the total amount of taxable interest that you have received throughout the year. Examples of this are interest earned on a savings account.
  • Box 2: This box will report any penalties that you were assessed for early withdrawal of money.
  • Box 3: This box will report any interest you have received from items such as Treasury notes, bonds, bills or US savings bonds. Some of the interest gained form these sources may be tax exempt.
  • Box 4: This will report any federal taxes that have already been withheld from interest income.
  • Box 8: This box will show any interest earned through items from a state, such as municipal bonds.

Reporting Interest

You are required to report the total amount that is listed on a 1099-INT in box 1 in the line marked taxable interest on your federal tax return. The amount you report is taxed as other forms of income reported. If you had any penalties assessed to you in Box 2 of your 1099-INT, you may be eligible to claim a deduction in the Adjusted Gross Income section. Amounts in Box 8 are used for reference purposes only as the income reported here is tax exempt, but it is still required to be reported on your federal tax return.

If your taxable interest is greater than $1,500 total you must complete Schedule B of form 1040 and state the amount of interest

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As a business owner knowing what you are doing at tax time can have a large outcome on your end of year finances. There are tax regulations that can help lower the amount of taxes your business is required to pay, these deductions can be applied to certain business expenses. The amount of money deducted from your gross income will result in your taxable business income being lower.

By maximizing your deductions you can help lower the amount of business profits that are taxed. Some of the things that can be deducted include items such as, business trips and vacations, a new car and retirement savings plans. You will have to know how to file your deductions with the IRS to avoid any issues with your taxes.

Necessary and Ordinary Expenses

According to the tax code; Section 162, all expenses you seek to deduct for business must be considered ordinary and necessary. Although this tax code does not give any definition for either term of ordinary or necessary, so you have to think logically what can actually be deducted as a business expense. Generally this deduction would cover expenses such as office supplies or equipment used only in that business.

Large Expenses

Section 162 of the tax code does not place any limits on the amount that you can deduct for business expenses, although they do imply that any large expenditures must be reasonable. For example; a small business owner can’t fly half way across the world to find a paper manufacturer, but a large company would be able to deduct the cost of travel to visit a supplier.

Personal Expenses

The IRS does check to see if business owners try to deduct personal expenses as a business expense. Travel to and from work is considered a personal expense so you cannot claim that as a business expense. Likewise you cannot personal use of a company credit card or car as a business expense, the IRS closes watches these types of deduction claims.

There are many legal ways to claim the maximum deduction for business expenses and can help you spend money more wisely along the way.

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A lender is required to provide you with a 1098-E if you have paid more than $600 during the year in student loan interest. You are not required to do itemized deductions to take advantage of the student loan interest deductions. When you file your taxes student load interest will be subtracted from your total adjusted gross income (AGI) for the year.

Any interest you paid on personal loans, other than an exception of specific mortgage loans, is generally not deductible on your tax return. Though some taxpayers who have a modified adjusted gross income (MAGI) under $80,000 may qualify for student loan interest deduction used for higher education. If you are married and filing jointing you have a higher MAGI threshold of $160,000. Often MAGI is determined before deduction student loan interest from your reported gross income on your tax return. In 2014 student loan interest may decrease the amount of taxable income.

If you paid student load interest in excess of $2,500 you can only deduct up that amount.

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If you are a student the summer is a great time to earn a little extra cash and get a job. You have more free time being off from school and having a summer job can teach you about responsibility and give you some real world working experience. Having a summer job also means you will have to pay taxes like every other working person. The taxes you pay help your local community as well as your state and federal government. If you are a student working during the summer you should know the basics about taxes.

Taxes from working your summer job will be withheld from your paycheck by your employer. Your employer withholding taxes from your pay check is the easiest way to go. Some workers who are self-employed pay an estimated tax amount to the IRS on designated pay dates. The US tax system is set up as a pay as you go system, meaning you pay taxes as you earn money. (more…)

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If you are disabled there is a variety of tax credits available. By using these credits and deductions you can lower the amount of taxes you may owe, sometimes this can even lead to a refund. The IRS defines as being disabled by the following two conditions:

You are physically or mentally disabled that limits your ability to work, such as deafness and blindness.

You are impaired physically or mentally and it affects your ability to do common tasks that would affect your ability to work, such as walking, speaking, or breathing impairments.

There are a few different tax credits available for those who are disabled. These include; A credit for elderly/disabled, a credit for medical expenses and a larger standard deduction. (more…)

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As you know if you have a rental property you are required to report any earnings from tenants in your properties as income. Although if you have a property that you live in most of the year, but rent for short periods you may not have to report any income earned. You may even be able to deduct the costs that you have from renting the property, but you may also be limited on you deductions if the property is also your home. If you rent out a vacation home you need to know what it will affect at tax time.

Vacation Homes – Almost any type of property can be a vacation home such as; houses, apartments, condos, mobile homes and even boats.

Schedule E – You report any earned rental income by filing a Schedule E, Supplemental Income and Loss. You may also have the Net Investment Tax applied. (more…)

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