- IRS Tax Information
- Mileage Deduction
- Capital Gains Tax & Loses
- Life Change and Your Taxes
- IRS 1031 Tax Exchange Rules
- To be deductible, a business expense must be both ordinary and necessary.
- An ordinary expense is one that is common and accepted in your trade or business.
- A necessary expense is one that is helpful and appropriate for your trade or business.
- An expense does not have to be indispensable to be considered necessary.
WASHINGTON — The Internal Revenue Service today issued the 2016 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 54 cents per mile for business miles driven, down from 57.5 cents for 2015
- 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
- 14 cents per mile driven in service of charitable organizations.
- The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Capital Gain Tax and Losses
Then things to know about capital gain and losses
Capital assets include a home, house Hold furnishings, stocks and bonds held in a personal account. When you sell a capital asset, the difference between the amount you paid for the its sales price is a capital gain or capital loss. Here are ten facts from the IRS about how gains and losses can affect your federal income tax return.
- Almost everything you own and use for personal purposes, pleasure or investment is a capital asset
- When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.
- You must report all capital gains.
- You may only deduct capital losses on investment property, not on personal-use property.
- Capital gains and losses are classified as long-term or short-term. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term.
- If you have long-term gains in excess of your long-term losses, the difference is normally a net capital gain Subtract any short-term losses from the net capital gain to calculate the net capital gain you must report.
- The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2011, the maximum capital gains rate for most people is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of the net capital gain. Rates of 25 or 28 percent may apply to special types of net capital gain.
- If your capital losses exceed your capital gains, you can deduct the excess on your tax return to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.
- If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.
- This year, a new form, Form 8949, Sales and Other Dispositions of Capital Assets, will be used to calculate capital gains and losses. Use Form 8949 to list all capital gain and loss transactions. The subtotals from this form will then be carried over to Schedule D (Form 1040), where gain or loss will be calculated
Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property.
Most types of tangible property (except, land), such as buildings, machinery, vehicles, furniture, and equipment are depreciable. Likewise, certain intangible property, such as patents, copyrights, and computer software is depreciable.
In order for a taxpayer to be allowed a depreciation deduction for a property, the property must meet all the following requirements:
The taxpayer must own the property. Taxpayers may also depreciate any capital improvements for property the taxpayer leases.
A taxpayer must use the property in business or in an income-producing activity. If a taxpayer uses a property for business and for personal purposes, the taxpayer can only deduct depreciation based only on the business use of that property.
The property must have a determinable useful life of more than one year.
Life Changes & your taxes
IRS 1031 Tax Exchange Rule