Buy that New Truck!

New trucks, vans and SUVs with loaded gross vehicle weight in excess of 6,000 pounds bought for a business can qualify for 100% bonus depreciation based on 100% business use. This bonus depreciation applies to new qualified assets placed in service from September 9, 2010 through December 31, 2011. Note that it expires at the end of this year so act now.

Social Security Benefits

The calculation for social security benefits is based on your highest 35 years of earnings (W-2 wages and self employment income). This is called the primary insurance amount (PIA) and you want it to be as high as possible. If you didn't work for some of those years, you'll have some zeros which will drive the PIA down. To maximize your benefit, you may want to consider working longer to replace some of the lower wage years.

Basis

If you sell an asset, how do you determine whether you had a taxable gain or loss? It seems simple but it's not. You first have to determine the basis of the asset which is cost plus acquisition and installation charges if you purchased the asset. If you received the asset as a gift, then your basis is the donor's basis or the fair market value (FMV) at time of gift  determined when you sell the gift property. If you sell at a gain it is the donor's basis, and if you sell at a loss it is the lesser of the donor's basis or the FMV at time of gift. Inherited property basis is the FMV at date of death. Does any of this matter if you sell the family car for much less than you paid for it? No because a loss on the sale of property used for personal purposes is not deductible.

Foreign Charities

In general, donations to foreign charitable organizations are not tax deductible. However certain Canadian, Mexican, and Israeli charities qualify for US tax deduction per their income tax treaty with our country.

Taxability of Insurance Claims and Lawsuits

If you receive money from a lawsuit or insurance claim, is it taxable?  It isn't if it is paid on account of physical injury or illness. Even if you receive damages for emotional distress relating to an injury it still isn't taxable. The following damages are taxable: punitive damages, interest on awards, discrimination, slander, defamation, libel, and harassment. Payment for property damages less than basis is also not taxable.

IRAs and Roths Differences and Similarities

The regular annual contribution limit for both is $5,000 and they both grow tax free. You have to have earned income up to $5,000 to make the maximum contribution. You have to start taking money out of your IRA at age 70 1/2 but you aren't forced to with a Roth. When you take money out of an IRA it is generally subject to income tax. Qualified distributions from a Roth are nontaxable. The Roth contribution is not tax deductible but an IRA contribution is if you are not covered by an employer retirement plan. If you are covered by an employer plan, the deduction is subject to a phase out based on adjusted gross income.

Feeding Your Employees

You can provide the following items to employees without adding to their W-2s:
1.Coffee, doughnuts, soft drinks or similar items.
2. Occasional meals provided to an employee working overtime.
3. Occasional parties or picnics for employees and their guests like the office Christmas party.
The IRS calls these items a de minimis benefit and allows you to deduct their full cost instead of the normal 50% for business meals and entertainment. It is the best of both worlds, a full tax deduction for you and no compensation for the employee.