Economics Finance

Owning a rental property may be advantageous in some ways. The income you get from rental real estates can sometimes be a substantial amount, and this could increase your tax liability. However, landlords can reduce their income tax on their profits. This is possible through investments. To know more about rental tax deductions, read on.

There are two types of investors: passive and real estate professional. The losses of real estate professionals are deductible against all types of income, be it passive or non-passive. If the losses are passive, then the landlord is only allowed to deduct up to $25,000 against the rentals’ income. Conversely, losses that exceed up to $25,000 can be carried forward to the following year. Continue reading ‘What You Should Know About Rental Property Tax Deductions’ »

You are about the “crack the code” on business expenses and tax deductions. Following this simple-to-follow and easy-to-implement information will help you get the most out of your tax deductions.

The expenses to run a trade or business are business expenses. Rent, payroll, advertising, repairs, interest, depreciation, taxes, etc. are few examples of business expenses. If the business is run to make profit and the expenses are ordinary and necessary, then these expenses qualify as deductible business expenses. Payroll expense is commonly accepted expense for most businesses and therefore it is deductible business expense.

It is necessary to distinguish the business expenses from cost of goods sold, capital expenses, and personal expenses because these expenses have special rules to decide how to figure out these expenses, and how much can be treated as deductible business expenses for a particular tax year. Let us review these expenses with some more details.

Cost of Goods Sold:

If you are in manufacturing or resale business, you need to value your inventory at the beginning and end of tax year to determine your cost of goods sold. Cost of raw materials, freight, storage, direct labor, factory overheads are the type of expenses that go into figuring cost of goods sold. Cost of goods sold is deducted from gross receipts to figure out gross profit. The expenses allocated to figure out cost of goods sold, cannot be claimed again as business expense. Continue reading ‘Business Expense & Tax Deductions – A Complete Guide on Business Expenses For Tax Deductions’ »

The environment is something that has become a major front-runner in good, healthy living recently. More and more people are realizing that if we’re going to survive in this world, we have to look after our environment and become more earth-friendly. Luckily, the United States of America and the wonderful government running our country, has given us so many tax deductions for a green living. It is now worth it for us to actually invest into a greener future. No longer are green living options very expensive and out of our reach, with the help of the government, investing into a greener future also means more tax deductions for us at the end of our tax period.

Going Hybrid

Hybrid cars are the new generation environmentally friendly cars that are currently being mass-produced by Honda and Toyota. Depending on the specific type of car you are buying, you can get a tax break between $250 and $7,500. It is important to speak to your tax consultant or do research online to see what tax breaks you will get for your specific car. Not only will you essentially be saving money on petrol and fuels that have become so costly, you’ll be driving a car that does minimal damage to the environment. Continue reading ‘Tax Deductions For Green Living’ »

Your tax deductions are limited by the amount of income your hobby generates. If you run your hobby as a business, your business expenses are deductible, even though they may exceed business income. The difference between a hobby and a business is a very fine line. If you deduct your losses from a business that the IRS considers a hobby, you must be able to prove that you are operating it with the intent to make a profit.

As far as the IRS is concerned, a business is something engaged in to make money. There are no requirements however that say that you must actually make money. The only rule is that you must intend to make money. If you make a profit in 3 out of 5 consecutive years it is assumed that you are engaged in the business for profit. Although the IRS can challenge the assumption, it does not usually do so.

You can choose to delay any IRS determination until the first five years are up by filling out an IRS form. However in making this decision, you must sign a waiver of the three-year statute of limitations on sideline business items for the tax years involved. If you don’t meet the presumption the IRS can challenge your deductions as hobby losses. You will then have to prove your intentions. Some of the things you may have to show are: Continue reading ‘How to Make Your Hobby Tax Deductible’ »