Business Taxes, Family Taxes, General Information, General Tax Topics, Self Employed, Small Business, Tax Debt, Tax Deductions, Tax Planning, Tax Reduction, Uncategorized

Unlock Tax Deductions with a Rental Property Home Office

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With the start of a new tax year, you’re probably looking for new tax savings opportunities, like our Chicago South Loop Tax Preparation clients.

As you probably know, establishing a home office for your Schedule C or corporate business creates valuable tax deductions.

But it’s not available only for your proprietorship,partnership, or corporate business. If you have rental properties, you can establish a home office to manage your rental properties and deduct the cost on your Schedule E.
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Rentals as a Business

The first hurdle is that your rental activities have to qualify as a “trade or business” under the tax law.

Luckily for you, that’s relatively simple—you’ll need regular and continuous involvement with your rental activities to meet this requirement.

Whether or not your rental activities are a trade or business depends on the facts and circumstances of your particular situation, and tax court cases give us guidance on that.

Qualifying Area

Your second hurdle is setting aside space in your home that qualifies for the home-office deduction.

For this to work, you need to use that space in your residence regularly and exclusively as the principal place of business for your rental activities.
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This sounds hard, and it was hard—before lawmakers changed the rules to include, as a principal place of business, the space you use for administrative or management activities, provided there is no other fixed location where you conduct substantial administrative or management activities.

Home-Office Deduction

Establishing a rental property home office does two things to your household expenses:

  1. Turns non-deductible household expenses into tax deductions.
  2. Moves household expenses normally deductible on Schedule A to your rental properties on Schedule E.

The latter is especially important after passage of the Tax Cuts and Jobs Act

  • put a $10,000 limit on your Schedule A state and local tax deductions, and
  • lowered the amount of your mortgage on which you deduct mortgage interest from $1 million to $750,000.

Eliminate Commuting

Without a qualifying home office, your mileage from home to your first business stop and then from your last business stop back home is non-deductible commuting mileage.

But here is what happens with the rental property’s principal office in your home:

  1. You have no commuting mileage from your home to and from your rentals, if the rentals are in the area of your tax home (say, within 50 miles).
  2. You establish your rental property tax home, and if your rentals are outside the area of your tax home, then the mileage from your home to and from the rentals is deductible business mileage because you are traveling outside the area of your tax home.

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Real Estate Professional

If you qualify as a real estate professional under the tax law, then you can deduct 100 percent of your rental losses in the year you incur them.

But there’s a big hurdle to the tax law classification as a real estate professional. You must show that you spend

  • more than 50 percent of your personal service work time in real property trades or businesses in which you materially participate, and
  • more than 750 hours of service during the tax year in real property trades or business in which you materially participate.

Having a rental property home office that qualifies as a tax-code-defined principal place of business makes it easier to qualify as a real estate professional, because your time spent on deductible travel to and from your rental properties counts toward the time requirements.

Claiming Your Deduction

The Schedule E instructions not only fail to provide any explanation about where to put your home-office deduction, but they also do not even mention a home office.

But the instructions do say that you can deduct ordinary and necessary business expenses, and the home office meets that rule. Also, as established in Curphey (a precedent-setting case), the home office is allowable as an expense against income from a rental business.

If you would like to discuss your rental properties with me, please call us directly at 855-743-5765. Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Business Taxes, cannabis, Chicago cannabis, Family Taxes, General Information, General Tax Topics, Self Employed, Small Business, Tax Debt, Tax Deductions, Tax Planning, Tax Reduction, Uncategorized

Impact of Death, Retirement, & Disability on the 179 Tax Deduction

hospital work process

What tax effect would death, retirement, or disability have on you or your business?

Here’s an easy example to illustrate.

Let’s say that in 2017, you purchased (for business use) a pickup truck with a gross vehicle weight rating greater than 6,000 pounds. Asserting that you use the pickup 100 percent for business, you expensed the entire $55,000 cost.

What happens to that $55,000 expensed amount if you die, retire, or become disabled before the end of the vehicle’s five-year depreciation period?

Death

If your heirs are not going to pay estate taxes, your death is about as good as it gets. Here’s why:

  • You get to keep your Section 179 deduction. (It goes to the grave with you.)
  • Your pickup truck gets marked up to fair market value. (Remember, you expensed it to zero, but now at your death, the fair market value is the new basis to your heir or heirs.)

Example. Using Section 179, you expensed the entire cost of your $55,000 pickup truck. You die. Your daughter Amy inherits the pickup at its fair market value, which is now $31,000, and sells it immediately for $31,000. Here are the results:

  • You get to keep your Section 179 deduction—no recapture applies.
  • Amy pays zero tax on her sale of the pickup truck.
  • Your estate includes the $31,000 fair market value of the pickup, and if your estate is less than $11.4 million, your estate pays no estate taxes.

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Disability

This is ugly. If you become disabled and you allow your business use of the pickup to fall to 50 percent or below during its five-year depreciable life, you must recapture and pay taxes on the excess deductions generated by the Section 179 deduction.

To make matters worse, you must use straight-line depreciation in making the excess-deduction calculation.

Retirement

With retirement, you have exactly the same problem as you would have if you became disabled. In fact, with retirement, you disable your business involvement, and that makes your pickup truck fail the more-than-50-percent-business-use test, resulting in recapture of the excess benefit over straight-line depreciation.

Takeaways

You need to consider what happens should you become disabled, or retire, or die.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Business Taxes, Family Taxes, General Information, Self Employed, Small Business, Tax Debt, Tax Deductions, Tax Reduction, Uncategorized

Owe the IRS? Find out what your credit report tells them.

 

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Author: Trudy M. Howard

In our Chicago tax debt office you’ll often hear me say “the IRS is worse than the FBI.” Of course this is simply my opinion (based upon years of research, tax debt cases, education, and government documents), but if the IRS isn’t worse than the FBI, they surely are a close 2nd!

When I tell you that the IRS can find out anything,  I mean they can find out anything (except for your blood type, but I’m sure that’s pending)! The IRS has access to systems that you wouldn’t believe existed. For example, did you know that the IRS receives a weekly file of new movers? It’s true. “The United States Postal Service (USPS) provides an address update product — the National Change of Address Linkage (NCOALink), and the IRS receives a weekly NCOALink file from USPS. The file contains all of the reported changes of address in the United States for the week.” Not only does the IRS use this system, along with several others, the IRS also has the authority to pull a debtor’s credit report! Keep reading to see what your credit report tells the IRS.

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There are 6 key things that an IRS collections representative is looking for when they access your credit report.

  • Previous residences along with old/current employers.
  • Other lien holders to see how much you owe, and how much you’ve paid.
  • Property that may not have been disclosed during your collections interview.
  • Leads to hidden assets by identifying other creditors.
  • Financial institutions that you have done business with in the past and currently.
  • Entities and associations with foreign banks and corporations.

Hopefully, by viewing this list you see that it is important to disclose all financial information when dealing with the IRS. Once you submit all of your financial information,  Howard Tax Prep LLC, located in the South Loop of Chicago, can help you with an IRS tax debt settlement, a tax debt payment plan, removal of tax lien, and IRS wage garnishments in Chicago, and all 50 states.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Business Taxes, General Information, General Tax Topics, Self Employed, Small Business, Tax Deductions, Uncategorized, Vehicles

Commercial Fuel Card Without A Personal Guarantee.

gas card

Commercial Fuel Card

Gas Cards Without A Personal Guarantee

Would you like to free up some cash so that you can increase your marketing budget, purchase more supplies, or reward your employees? Have you heard about obtaining business credit without a personal guarantee, but haven’t been able to secure your own business credit? Are you a small business owner that has damaged personal credit? Have you been told that you can’t get business credit if you have bad personal credit? If any of these things apply to you, you’ve come to the right place!
To start, let us explain what a “personal guarantee is.” A personal guarantee means that the owners will be held personally liable for the debts of their business. Suppose you have a LLC Howard Tax Prep LLC has partnered with a national gas chain (comparable with Exon Mobil, Citgo, etc. with over 18,000 locations worldwide) to offer small business owners (being defined as businesses with revenues under 1 million dollars) fuel cards that report business payment history to Dunn and Brad Street, and Equifax every 30 days!
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Only verified businesses that are structured as a LLC, S-Corp, or C-Corp with a Dun and Brad Street number will qualify. Because this is not a publicly marketed program, your business must be verified, prior to receiving the name of the fuel company (but trust us, you can find a station near you).  

The best part about this offer? THE CARDS ARE ISSUED WITHOUT ANY PERSONAL LIABILITY TO THE OWNERS, & WITHOUT THE USE OF THE OWNERS PERSONAL CREDIT. If you need a truck driver fuel card, Uber driver fuel card, Lyft driver fuel card, or just a general small business owner fuel card, we can help! 

WHAT ARE THE DETAILS?

  • National fuel provider. Qualified businesses that are ready to move forward will be given the name of the fuel company prior to paying the 1 time $49.95 Howard Tax Prep LLC processing fee.
  • Minimum deposit of $200 for a $500 credit line is required.
  • Accounts are reviewed every quarter for credit line increases.
  • After 12 months of ON TIME PAYMENTS, your deposit will be returned.

WHAT ARE THE REQUIREMENTS?

  • Business Must Be Structured As A LLC, Corporation, or S-corporation.
  • Must have a BUSINESS CHECKING account.
  • Must Agree To Make ON-TIME Payments.
  • Deposit Payment Can Only Be Drafted From Business Checking account.

Who should use fuel cards?

Owner Operator Truck Driver

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Owner Operator Truck Drivers no longer have to use personal credit cards or cash profits to purchase fuel! Reduce driver fraud by setting fuel limits & restricting usage. Save on fuel cost, while building your business credit Paydex score.     

  • The principal or owner is not personally liable for any bad debt.
  • The account will be in the name of the business.
  • Helps to Establish & build business credit.
  • Account payment history reported to DnB and Equifax every 30 days.
  • Accepted at over 18,000 locations Worldwide.
  • Free online invoicing.
  • Activate new cards as needed.
  • Restrict cards with fuel only limits & purchase restrictions during non-business hours.
  • Save up to 6¢/gal* on fuel purchases at thousands of locations in the U.S.
  • Earn rebates on fuel at branded locations.

GET YOUR CARD NOW!

Small Business Owner

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Small business owners no more using your profits & personal credit cards to cover fuel cost. Use the cash you save and apply it toward marketing, inventory, and more! Save on fuel cost, while building your business credit Paydex score. 

  • The principal or owner is not personally liable for any bad debt.
  • The account will be in the name of the business.
  • Helps to Establish & build business credit.
  • Account payment history reported to DnB and Equifax every 30 days.
  • Accepted at over 18,000 locations Worldwide.
  • Free online invoicing.
  • Activate new cards as needed.
  • Restrict cards with fuel only limits & purchase restrictions during non-business hours.
  • Save up to 6¢/gal* on fuel purchases at thousands of locations in the U.S.
  • Earn rebates on fuel at branded locations.

GET YOUR CARD NOW! 

Uber & Lyft Driver

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Uber and Lyft Drivers that would like to build their business credit, and free up their cash flow. Use your additional cash flow for brake repairs, oil changes, and more! Save on fuel cost, while building your business credit Paydex score.  

  • The principal or owner is not personally liable for any bad debt.
  • The account will be in the name of the business.
  • Helps to Establish & build business credit.
  • Account payment history reported to DnB and Equifax every 30 days.
  • Accepted at over 18,000 locations Worldwide.
  • Free online invoicing.
  • Activate new cards as needed.
  • Restrict cards with fuel only limits & purchase restrictions during non-business hours.
  • Save up to 6¢/gal* on fuel purchases at thousands of locations in the U.S.
  • Earn rebates on fuel at branded locations.

 GET YOUR CARD NOW!  

How easy it to use the card?

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 1-2-3 Driver Instructions 

  • Swipe card
  • Enter driver ID when prompted (may also be call DIN or PIN)
  • Enter odometer reading when prompted
  • The principal or owner is not personally liable for any bad debt.
  • The account will be in the name of the business.
  • Helps to Establish & build business credit.
  • Account payment history reported to DnB and Equifax every 30 days.
  • Accepted at over 18,000 locations Worldwide.
  • Free online invoicing.
  • Activate new cards as needed.
  • Restrict cards with fuel only limits & purchase restrictions during non-business hours.
  • Save up to 6¢/gal* on fuel purchases at thousands of locations in the U.S.
  • Earn rebates on fuel at branded locations.

 GET YOUR CARD NOW!