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MONTHLY TAX NEWSLETTERJanuary 2014
Personal financial planning is an ongoing process. The good news is that financially speaking, 2013 was a really good year. The stock markets are at all time highs. Many real estate markets around the country rebounded nicely. And interest rates remain near historic lows.
Hello 2014. Who knows how financially friendly this year will be? For that reason, here are some prudent steps you can take to keep your personal finances moving on the right track:
Questions about financial planning steps you should take for 2014? Please check out our Directory of Financial Advisors to find a professional familiar with the financial planning issues that affect you and your colleagues.
The IRS announced that the standard mileage rate will decrease to 56 cents per business mile driven in 2014. That is a decrease of approximately 0.9% over the 56.5 cents allowed in 2013. According to the IRS, "The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile."
When you use your car for business, driving between job sites is deductible. So is driving between your home and a temporary job site, job interviews, and conferences. Commuting between your home and a regular place of business generally isn't tax deductible.
Standard Mileage Rates Versus Actual Expenses
There are two ways for you to calculate your automobile expenses. You can either claim $.56 per business mile driven in 2014 (decreased from $.565 for 2013), or you can base your deduction on the percentage of miles your car was driven for business purposes multiplied by the actual costs incurred during the year. Allowable costs include gas, insurance, repairs, parking at home, and either your lease payments, or if you own your car, a factor for depreciation.
Generally, unless you drive your car relatively few miles each year, with most of those miles being allowable business miles, you're often times better off over time by basing your deduction on the standard mileage rate.
Let's say you lease a car for $400 a month that you drive only 3,000 total miles during the year. And of those miles, 2,000 qualify as deductible business miles. By calculating your deduction based on the standard mileage rate, you'll end up with a deduction of just $1,120 (2,000 business miles * $.565 per mile).
What would your deduction be based on the actual expenses incurred, assuming you spend $1,200 on insurance, $.10 per mile driven for gas, and $1,200 on parking at home? Based on $7,500 of total automobile expenses (including the lease payments), multiplied by two-thirds (2,000 business miles divided by 3,000 total miles), your allowable deduction for your automobile expenses jumps to $5,000 - almost five times the $1,120 allowed using the standard mileage rate.
Now let's see what happens if you drive 20,000 total miles during the year. Assuming your allowable business miles remains at 2,000, you can either claim an automobile deduction of $1,120 based on the standard mileage rate, or $920 based on one-tenth (2,000 business miles divided by 20,000 total miles) of your actual automobile expenses incurred.
How to Claim The Deduction
Taxpayers who are compensated as employees generally will claim their deductible automobile expenses as an unreimbursed employee business expense. These type expenses are reported on a Form 2106 and are deducted as a miscellaneous itemized deduction on the Schedule A. Keep in mind that miscellaneous itemized deductions are only allowable to the extent they exceed 2% of your income, and are not allowable when calculating the Alternative Minimum Tax (AMT).
Those taxpayers compensated as independent contractors will generally claim their allowable automobile expenses directly against their self-employment income. For these taxpayers, automobile expenses should be reported the Schedule C.
Other Deductible Miles
The use of an automobile in connection with a charitable activity is deductible at a rate of 14 cents per mile in 2014 and should be reported with other charitable contributions as an itemized deduction of the Schedule A.
You'll deduct any mileage driven in connection with a qualified move at a rate of 23.5 cents per mile in 2014, down from 24 cents per mile in 2013, and should report that mileage along with your other allowable expenses on a Form 3903, Moving Expenses.
And don't forget that medical related mileage is also deductible. For 2014, medical mileage is allowable at 23.5 cents per mile, and should be reported with all other medical expenses on the Schedule A.
We're pleased to share with you with links to the following presentations recorded during 2013:
Physicians, dentists, psychologists, and other healthcare professionals can often times save some taxes by deducting their unreimbursed professional expenses. Check out this presentation to learn about a variety of professional expenses commonly deducted by doctors in the U.S.
Wondering which type of retirement plan makes the most sense for your practice? Check out this presentation on the most common retirement plan options available to practice owners. You'll also learn why it makes sense to set up and begin to max out your retirement plan savings as soon as possible.
The ten "million dollar metrics" presented in this video will provide general dentists with valuable insight to help improve their practice management. General dentists can learn which metrics to generate to gauge how their dental practice is doing, and then compare those metrics with other general dental practices, including those practices from the sample that collected one million dollars or more during 2012.
Learn to increase revenues and profits at your practice by implementing a Simple Incentive Bonus System. For short we call this SIBS. We've seen a lot of clients implement bonus system similar to the one presented in this video who saw immediate positive results within their practice.
Recorded Short Presentations on QuantiaMD:
We also have four three-minute multi-media podcasts, including insightful poll questions, available only on QuantiaMD:
And One Modest Attempt at Humor.
Editor's note: Please don't ask us why. Sometimes there are things in a person's brain that just need to come out. Please remember that we are tax accountants first, and I don't even know where comedian would come on this list.
Suggestions for Future Recorded Presentations???
If you have any suggestions for information you'd like us to include in our 2014 recorded presentations, please e-mail me.
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