Standard Mileage Rates To Go Down In 2010

The IRS announced the standard mileage rates for 2010 this week.  The standard mileage rate is the amount used to calculate the cost of using a personal vehicle for business, charitable or medical purposes.

Starting on January 1^st, the standard mileage rates will be:

Business: 50 cents per mile
Medical or moving: 16.5 cents per mile
Charitable: 14 cents per mile

The standard mileage rates are lower than the 2009 rates to reflect the decrease in the cost of gas.  The IRS studies the cost of operating vehicles to determine the appropriate rate to use for deducting car expenses each year.  If the cost of gas rises significantly during the year, such as it did in 2008, the IRS can do a mid-year increase in the standard mileage rates.

Taxpayers have the option of deducting either the actual cost of operating their vehicle or using the standard mileage rate.  However, the standard mileage rate can not be used for a vehicle if the taxpayer has deducted depreciation on the vehicle, or if they have taken the Section 179 deduction for that same vehicle.

The standard mileage deduction is beneficial for taxpayers because it reduces the amount of recordkeeping that needs to be done, but it can result in a lower tax deduction than the actual cost method for people who have purchased new vehicles.

Source: IRS Announces 2010 Standard Mileage Rate

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Tax Carnival 46 – Inauguration Day

The 46th Tax Carnival is posted.  And since today is Inauguration Day, Kay Bell (keeper of the Tax Carnival) has chosen the inaugural process as the theme.

Here are a few articles you’ll find in this week’s tax carnival:

Pragmaticsage has some advice in Choosing a tax preparer: Do you need a CPA?

Robert D Flach, THE WANDERING TAX PRO of the Web, tells us WHAT NOT TO DO! when searching for a tax pro.

Continue Reading Tax Carnival 46 – Inauguration Day

December 31st Is The Last Day for Most Tax Planning Strategies

Just a reminder that 2008 will be over in less than two weeks, and that means that your opportunity to reduce your 2008 taxes is coming to an end soon as well.  Most tax planning strategies must be implemented before the end of the year to reduce the current year’s taxes.  There are a few exceptions (funding your IRA for example), but for the most part, once the tax year is over, it’s too late to reduce your taxes for that year.

There have been many changes to the tax law this year so you may not even be aware of all the tax credits and deductions that you may qualify for.  Here are some tax planning strategies that you may be able to take advantage of before the year ends:

Real Estate Tax Deduction — New for 2008, there is an additional standard deduction for those who don’t itemize their deductions, but who pay real estate taxes. The additional deduction amount is equal to the amount of real estate taxes paid up to $500 for single filers or up to $1,000 for joint filers. This deduction is available for the 2008 and 2009 tax years and increases your standard deduction.

Continue Reading December 31st Is The Last Day for Most Tax Planning Strategies

Savers Credit Helps Low to Middle Income Taxpayers Save for Retirement

Not many people are aware of the saver’s credit, which helps offset part of the first $2,000 that taxpayers contribute to IRAs , Roth IRAs, 401K and other retirement plans.  This credit is also known as the retirement savings contributions credit.

The saver’s credit is available in addition to other tax deductions and credits that a person may qualify for, so taxpayers who take a deduction for contributions made to IRAs, 401Ks and other tax-deferred retirement accounts, and who also qualify for the saver’s credit, essentially get a double tax break.

You still have time to make contributions to your retirement accounts and get the saver’s credit, if you qualify.  The deadline for setting up or adding money to IRAs and still get credit for 2008 is April 15, 2009.  But if you’re planning on contributing to your 401K or other employer sponsored plan, you need to get your contributions in by the end of the year.

Continue Reading Savers Credit Helps Low to Middle Income Taxpayers Save for Retirement

Reporting 1099 Income

I first started the Ebiz Tax Tips blog because I was getting a lot of questions from eBay sellers about taxes – whether they needed to report their income, what they could deduct, etc.

That was a couple of years ago.  Since then the number of bloggers, affiliate marketers and other people making money on the internet has exploded.  And the IRS has taken notice!

The number of 1099s that will be issued and received this year will probably be much larger than ever before.

So, you may be wondering, will you get a 1099?  And what should you do if you do receive a Form 1099?  How do you go about reporting 1099 income?

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Key Provisions in The Housing and Economic Recovery Act of 2008

On July 30, 2008, President Bush signed H.R. 3221, the Housing and Economic Recovery Act of 2008 (the “Act”).

The Housing Act is intended to revamp the housing finance industry, encourage home ownership and help prevent foreclosures. Below is a summary of some of the tax provisions in the bill that will affect current and future home owners:

* The Hope for Homeowners Program: The Act creates a new Federal Housing Authority (FHA) program designed to help borrowers in danger of losing their homes to foreclosure. Eligible homeowners may be able to pay off their original (foreclosing) lenders with a fixed-rate, 30-year-term mortgage for up to 90 percent of the appraised value of the property. Eligible homeowners are those who originated their loans before January 1, 2008, spend more than 31 percent of their monthly income on their mortgage, and are currently in danger of foreclosure. Borrowers would have to share future equity with the FHA. The program is completely voluntary; banks may elect not to participate. The program begins on October 1, 2008 and ends in September of 2011.

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IM Courses May Be Tax Deductible

If you’re an online business owner, you’ve probably noticed a LOT of product launches this year.

Many of us are on a budget, and struggled with the decision to purchase a product, even if it was something we really needed to grow our business.

Well, don’t forget that ordinary and necessary business expenses – including courses that you take, or course materials that you purchase for your business – are tax deductible.  Keep in mind, it does need to be business related, but if it helps you learn your business, or if it helps you market your business, then it is probably a deductible expense.

Which means that the $400 product you’ve got your eye on may only cost you $250-350 after taxes, depending on what tax bracket you are in.

Let me give you an example: let’s say you are in the 15% tax bracket and you operate your business as a sole proprietor.  Your total tax percentage is approximately 35% (15% Federal tax + 15.3% self employment tax + 5% state income tax).

When you purchase an item for your business that is tax deductible, you’ll get approximately 35% back in tax deductions, meaning a $400 product will cost you only $260 after taxes.

So if you’re got your eye on a marketing course, or the latest and greatest product that is being launched, and you’re only objection is the price, don’t forget about the tax benefits of being a small business owner.  You may be able to afford that new info-product that’s being launched today after all