Investments and your capital gains or losses.
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- Tax Information
- Mileage Deductions
- Capital Gain Tax and Losses
- IRS 1031 Tax Exchange Rule
IRS Tax Information
To be deductible, a business expenses 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.
2016 Standard Mileage Rates.
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 business mileage rate decreased 3.5 cents per mile and the medical, and moving expense rates decrease 4 cents per mile from the 2015 rates.
The charitable rate is based on statute.
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.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.
In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
Capital Gain Tax and Losses: Capital gains and deductible capital losses must be reported on your income tax return. Items ranging from stocks to home furnishings are considered capital assets. When capital assets are sold, you experience either a profit or loss. Selling assets for more than you paid for them will result in a capital gain; selling them for less will result in a capital loss.
Capital Gains: The IRS identifies long-term capital gains as assets held for more than one year after purchase; short-term capital gains are assets sold within one year or less of purchase. Long-term capital gains have a lower tax rate than short-term. The tax rate could be as high as 39.6% for short-term gains and either 0%, 15%, or 20% for long-term gains. You may be required to make estimated payments if you have substantial capital gains.
Capital Losses: If you have capital losses on investment property, you can claim no more than $3,000 per year ($1,500 if you are married filing jointly). If your total loss is over $3,000, you can carry it over to the next year and treat it as though you incurred it that year.
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.