Ordinary and Necessary Expenses

Getting a New Car for Business? Buy or Lease? Part 2: Tax Consequences

This blog will address the tax consequences of both leased and owned vehicles used for business purposes. Hopefully, it will offer some insight into the decision as to what is best for your business: buying or leasing?

With both owned and leased cars, any related expenses may be deducted using the standard mileage rate or the total amount of actual expenses. If the vehicle is owned, you may choose the standard mileage rate in the first year and switch to the actual expense method in a later tax year. If a vehicle is leased, you may also choose the standard mileage rate in the first year but once you the standard mileage rate is chosen, it must be used for the life of the lease.

Getting a New Car for Business? Buy or Lease? Part 1: Leased Vehicles

Many business owners rely on transportation to achieve the goals and purposes of their business. A car purchased for use in a business has certain tax advantages for the owner. However, many business owners are now leasing cars for business use. More Americans lease autos than ever before because of attractive monthly costs and the ability to change cars frequently to keep up with new technology and safety features. But what’s better for your business, an owned or leased car?

Customer Based Tax Incentives For Businesses

Taking advantage of tax incentives makes good sense for businesses. One reason a business owner should use tax incentives is to help underwrite the cost of maintaining its existing customer base, while continually striving to increase it. Whether a sole proprietorship, partnership, corporation, S corporation, or limited liability company (LLC), certain customer-based tax incentives may help a business reduce taxes.

The first priority for the owner of a business enterprise is to reduce taxable income by taking all of the deductions to which it’s entitled as business expenses. If the expense is ordinary and necessary to the business, it may be deducted under I.R.C. § 162. As defined by the Supreme Court:

Tax Treatment of Business Entities Part 4: C Corporations

Startup business owners must consider the legal and tax considerations associated with selecting a particular type of business structure. This is the fourth part of a series of blogs on the tax treatment of business entities. This blog will address the tax treatment of corporations, often referred to for tax purposes as C corporations.

Like an individual person, a corporation may be taxed and held legally liable for its actions. Individual shareholders are generally not personally liable for the debts of a corporation. This is one of the primary reasons that corporations are formed. When one or more individuals form a C corporation, they create an entity with two separate types of taxpayers, the corporation, and the shareholders. As a separate tax-paying entity, a corporation files Form 1120 or 1120-A, U.S. Corporation Income Tax Return.

Tax Treatment of Business Entities Part 2: LLCs

Startup business owners must consider the legal and tax considerations associated with selecting a particular type of business structure. This is the second part of a series of blogs on the tax treatment of business entities. This blog will address the tax treatment of limited liability companies (LLCs). LLCs are used by many business owners because, like corporations, their owners typically have limited personal liability for the debts and activities of the LLC. In contrast, some features of LLCs are similar to a partnership, such as pass-through or flow-through taxation.

Tax Treatment of Business Entities Part 1: Introduction

When starting a business enterprise, one of the most significant and important decisions to make is the choice regarding the legal form to use in operating the business. The alternatives include sole proprietorship, partnership, corporation (C corporation), S corporation, and limited liability company (LLC). Startup business owners must consider the legal and tax considerations associated with selecting a particular type of business structure. This is the first part of a series of blogs on the tax treatment of business entities.

Cutting Someone Else’s Losses: Conway Twitty & Twittyburger

Harold L. Jenkins, better known as the legendary country music singer, Conway Twitty, was able to accomplish something few before and after him have accomplshed, or even attempted for that matter. That is, pay back those who lost money as a result of an enterprise he sponsored. In a surprise turn of events, Twitty was also able to deduct these repayments from his federal taxes as ordinary and necessary expenses of his business.

Tax Treatment of Income from Hobbies

Countless Americans take pleasure from hobbies that also generate income. Collectibles of all types have skyrocketed in popularity, as well as income potential, in the last fifty years. Whether its dolls, baseball cards, stamps, coins, or Star Trek action figures, all types of hobbies have the potential to generate some amount of income, which, of course, is taxed by Uncle Sam.

The rules for reporting the income and expenses associated with a “hobby” depends upon whether or not the activity in question is a hobby or business. There are deductions that hobbyists may claim but they, like most everything, are subject to special rules and limits imposed by the Tax Code.

Can You Write Off Your (Expensive) Work Clothes?

Most employers impose a dress code for the office. As a result, there are more than a few members of the American workforce who must purchase items including expensive suits, dresses, shirts, blouses, and shoes to observe an employer’s dress code. Many employees have wondered whether the cost of these clothes, often worn only for work, is deductible at tax time.

When, If Ever, Can I Deduct Pet-Related Costs?

Believe it or not, there are some pet-related expenses which may be deducted from your taxes. Here is a summary of such expenses. And you thought all you were ever going to get out of this relationship was love, affection, and undying loyalty!

Medical Expenses

Taxpayers may include the expenses of buying, training and maintaining guide dogs used for assistance in cases of either reduced vision or hearing. This may include all necessary food, training, grooming and veterinary care. You may also deduct this expense if you’ve been diagnosed with a physical or mental condition that benefits from the attention of a trained therapy animal. Keep in mind that unless the animal is trained or certified as treatment for a diagnosed illness or condition, the IRS will disallow any deduction.

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