2014 tax deductions to make before the year's out

This video segment was on The Today Show this morning. I was just too busy to post in the forum until now. Do what you will with it.

[www.today.com] (VIDEO)

Edited 1 time(s). Last edit at 12/30/2014 11:41AM by Sybil2.

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You can write off the business percentage of the car. However, be aware that if you take Section 179 and write off the whole thing (up to the business percentage) the first year, one, you are stuck taking Actual Expenses instead of the mileage deduction forevermore, and two, if your business use percentage drops below 50% you have to "recapture" some of the Section 179 deduction you took in a horribly complicated calculation, and if you sell it too soon you will have to pay tax on all or most of the sale price because you reduced your basis so much.

I bought my hybrid at the end of 2013 and did not take any section 179 on it because I had made that mistake years before with a truck I bought near the end of the year to get to a client up on rural mountain roads that didn't get snowplowed (truck was 4WD). After the client closed and I wasn't going there any more, my business mileage percentage dropped like a rock. I had to do that recapture thing and swore never again.

I take the mileage deduction for the hybrid -- I make out like a bandit doing that because it gets 40 mpg and that 56 cents a mile is based on about 23.

Time to build a bigger bridge.
Can I still donate to a charity?

Edited 1 time(s). Last edit at 12/30/2014 03:14AM by Sybil2.
If you will owe state income tax for 2014, make an estimated tax payment for it, mailed by 12/31 so that you can claim the deduction for it on this year's return. My fourth 2014 state estimated tax payment is not due until 1/15/15, but I made it this month becasue I want that deduction for 2014 instead of waiting for the 2015 tax season to take it that year. One year I was running late and actually took the last payment to the local state tax office on 12/31 and got a receipt stamped with that date, just to be safe. Lots of folks were in line to do the same thing.

I am also looking to make year end charitable contributions.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

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You can make donations until midnight tonight -- most will take donations online -- to count toward 2014.

Time to build a bigger bridge.
im in a no income tax state so i can deduct sales tax instead.

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There are no stupid questions, but there are a lot of inquisitive idiots
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I have a better solution to all these tax problems. Just be like me and don't make any. No income, no taxes!

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At the moment only demons come to mind
I don't recommend taking deductions for your car unless it's mileage. 9 times out of 10 mileage is the best deal.

Depreciation seems like a great idea, but when you sell/trade in the vehicle...you will be required to pay back all your savings in one huge big check.

Live your life in such a way that when your feet hit the floor in the morning; the devil shudders...And yells OH #%*+! SHE'S AWAKE!
Technical stuff about car deductions. If math makes your eyes glaze over, you might want to skip this:

The best thing to do is calculate it both ways.

It *is* possible to switch methods under some circumstances. (If you switch to Actual Expenses, you have to recompute your basis in the car by adding up the depreciation component of all the Standard mileage deductions you have taken and subtract the total from what you paid for the "business part" of the car. You can then depreciate the rest of it. So it's a bit tricky, but it can be done.) (Switching from Actual to Standard is only allowed if you took straight-line depreciation from day one. Keep in mind that returns can be amended for three years.)

Usually if the car is very old and gets poor mileage you will do better with Actual expenses because repairs will be higher on an older car and the gas is more. If you don't drive the car a lot, a large percentage of those repairs may become deductible. (Example: the car was only driven 1000 miles, 250 were for shopping, and you had a $2000 repair bill. $500 of that bill is deductible under Actual Expenses, but you would only have $140 for standard mileage deduction) On the other hand, if a relatively new car is used just a little for shopping, the mileage deduction may be the better deal.

New cars have high depreciation, but this is capped each year, so the results will be different if the car is very expensive versus a $15,000 Toyota sedan.

It's always best to explore whatever options are available and decide what is best, not just for the current year, but for future years.

9 times out of 10 mileage may be better, but if you're the 10th person, taking mileage could cost you an opportunity to reduce taxes legally.

And if you lease your car, you must take Actual Expenses. You're not allowed to take the mileage deduction because it includes depreciation and you can't depreciate something you don't own. However if it's a lease purchase it may be treated as if it were owned.

And if you borrow a car to mystery shop, all you can take is the actual gas and oil that you paid out on it. You can't take standard mileage at all on a borrowed car, even if you pay the insurance and repairs. You didn't pay for the car, so you can't depreciate it, and depreciation is part of the standard mileage rate.

However if someone *gives* you a car, your basis in the car is equal to the donor's basis -- so you can take standard mileage on it because you own it and it had value when they gave it to you.

If you rent a car, you can deduct actual expenses based on the percentage of business use to personal use for the rental fee and the gas you put in it.

One size does not fit all, especially when it comes to vehicle deductions. But it's true that for most people the standard mileage deduction is best, and minimizes the record-keeping you have to do.

Time to build a bigger bridge.
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