IRS Reminders on Charitable Giving

Healthy list of reminders from the IRS about claiming tax deductions related to charitable giving.  Remember it is not always as easy as just writing the check to the charity.

IRS Summertime tax tips

President Obama's Jobs Bill

It's worth a post on our blog to provide a link to what is included in the President's Jobs Bill.  It is hard to invest much time on analysis expecting that so much will change if it becomes law...ever.

Good old bonus depreciation could be back for another year.  Punishment is handed out to corporate jet owners and owners of carried interests.

Much more to come on this subject.

CCH tax briefing

2011 Year End Tax Planning Opportunities - Capital Equipment

I know.  Summer just finished with the passing of Labor Day.  It's too early to think about year end tax planning.  Not so much...

Some business sectors of the economy are becoming stronger.  Encouraged businesses may be making decisions to buy additional capital equipment.  Planning opportunities remain related to bonus depreciation and Section 179 expenses deductions for 2011.

To encourage economic stimulus and job creation, Congress has enacted the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act of 2010). The Tax Relief Act of 2010 provides significantly increased incentives for business investment in capital and equipment, including a temporary extension of bonus depreciation, a bonus depreciation allowance of 100 percent of the cost of qualified property placed in service after September 8, 2010 and before January 1, 2012, and temporary increases in the deductible amount and investment limitation under Code Sec. 179 for tax years beginning in 2012.

The Tax Relief Act of 2010 extends the 50-percent first-year bonus depreciation allowance for two years to apply to qualifying property in service in the tax year through 2012 (through 2013 for certain longer-lived and transportation property). In addition, the provision expands the first-year bonus depreciation deduction to 100 percent of the cost of qualified property placed in service after September 8, 2010 and before January 1, 2012 (before January 1, 2013 for certain longer-lived and transportation property).

Under the extension provisions, a corporation also is permitted to increase the minimum tax credit limitation by the bonus depreciation amount with respect to certain property placed in service after December 31, 2010 and before January 1, 2013 (January 1, 2014 in the case of longer-lived and transportation property).

In addition to the bonus depreciation changes, the Tax Relief Act of 2010 increases the deduction and investment limits under Code Sec. 179. Generally, Code Sec. 179 permits a business that satisfies limitations on annual investment to elect to deduct (or “expense”) the cost of qualifying property rather than depreciate the cost over time. For tax years beginning in 2010 and 2011, taxpayers are permitted to expense up to $500,000 of the cost of qualifying property under Code Sec. 179, reduced by the amount by which the qualified investment exceeds $2,000,000. Qualifying property includes depreciable tangible personal property purchased for use in the active conduct of a trade or business. However, after 2011, the expense deduction limit of $500,000 was set to drop to $25,000. Similarly, the phase-out amount was scheduled to be reduced to $200,000.

To address this concern, the Tax Relief Act of 2010 increased the maximum amount a taxpayer may expense under Code Sec. 179 for tax years beginning in 2012 to $125,000 of the cost of qualifying property placed in service in the tax year, reduced, but not below zero, by the amount by which the cost of qualifying property placed in service in the tax year exceeds $500,000. These amounts are to be indexed for inflation. However, for tax years beginning in 2013 and thereafter, the maximum expense deduction permitted drops to $25,000 of the cost of qualifying property placed in service for the taxable year, with a maximum phase-out limit of $200,000, not indexed for inflation.

Tax planning action may be needed now to purchase and place qualifying equipment in service before the end of 2011.

More Off Shore Tax News

Just when you thought your Swiss bank account was a secret.  Apparently Switzerland is considering the disclosure of bank account information to the IRS.

Swiss to deliver some bank account data

The IRS has placed increasing emphasis on off shore and international tax compliance as part of its efforts to reduce the tax gap.

Buying a house in the U.S.? The IRS wants to know

That's if you are a Canadian resident.  It is interesting how a weak dollar promotes foreign citizens to consider purchasing real property in the US (can you say "do I have a deal for you?").  This is a great article about the income tax compliance issues for Canadian citizens who believe US real estate is a good investment.  It's not all roses...

http://www.financialpost.com/personal-finance/Buying+house+wants+know/5138905/story.html

The States' Battle for Revenue

The States' battle for sales tax revenue continues.  I wonder if a more productive process to determine who must collect a particular states sales tax could be developed with a little leadership from Washington.

http://www.latimes.com/business/la-fi-amazon-war-20110713,0,2902994.story

IRS Changes in Business Standard Mileage Rate

The IRS has announced a mid-year adjustment to the 2011 optional standard mileage rates. Effective July 1, 2011, the business standard mileage rate increases from 51 cents-per-mile to 55.5 cents-per-mile for the second half of 2011. The medical/moving standard mileage rate also increases by 4.5 cents-per-mile for the second half of 2011 but the charitable standard mileage rate remains unchanged at 14 cents-per-mile. The IRS took the unusual step of adjusting the rates mid-year because of higher gasoline prices.

Businesses generally can deduct the entire cost of operating a vehicle for business purposes. Alternatively, they can use the business standard mileage rate, subject to some exceptions. The deduction is calculated by multiplying the standard mileage rate by the number of business miles traveled. Self-employed individuals also may use the standard rate as can employees whose employers do not reimburse, or only partially reimburse, them for business miles driven.

In late 2010, the IRS set the 2011 business standard mileage rate at 51 cents-per-mile for 2011 and the medical/moving rate at 19 cents-per-mile. The charitable rate is set by Congress and remained at 14 cents-per-mile for 2011. The IRS uses a formula to calculate the rates. The formula takes into account gasoline prices and other costs associated with operating a vehicle.

Since the start of 2011, gasoline prices have risen in most parts of the country. In May 2011, a bipartisan group of lawmakers in Congress asked the IRS to consider a mid-year increase in the mileage rates to help offset higher gasoline prices. The IRS took similar action in 2005 after Hurricane Katrina and in 2008 when gasoline prices also climbed very high.

On June 23, 2011, the IRS announced an increase in the mileage rates for the second half of 2011. The business standard mileage rate is 55.5 cents-per-mile for business miles driven on or after July 1, 2011 and on or before December 31, 2011. The medical/moving rate is 23.5 cents-per-mile for miles driven on or after July 1, 2011 and on or before December 31, 2011. The charitable rate, because it is determined by Congress and not the IRS, is unchanged for the second half of 2011.

The Tax Side of Same Sex Marriage

New York State has adopted new laws (pending the Governors signature) that legalizes same sex unions in New York State.

What will be the impact of this event on income tax filing for same sex couples? Will they be considered to be married for tax filing purposes and receive the same tax benefits that other married couples receive?

While New York State may consider same sex unions as a marriage, the federal government has not passed similar rules. Thus these couples are not considered to be married when filing with the IRS.

Tax simplification????

Real Estate Income Tax Issues Update

We delivered a webinar related to updates of real estate income tax issues on May 18, 2011.  Click on the link and you can listen to a replay of the webinar.  You can get an update on important income tax issues that impact real estate developers, owners and lessors.

Please contact Mike Cooke or Mark Blood if you have questions.

DKB webinars

U.S. Business Has High Tax Rates but Pays Less - NYTimes.com

Great article in the New York Times about the impact of corporate income tax rates on American businesses. I cannot imgine a reduction in corporate income taxes rates without an adjustment of the taxable income base. The federal budget cannot afford any further loss of revenue. There are a number of credible arguments that reductions in corporate income tax rates could have a signficiant impact on bringing high quality jobs (manufacturing!) back to the United States.

It will be interesting to see how the states might react to a broading of the taxable income base. Will they reduce rates or use federal changes as an opportunity to collect more revenues?

I think the article is correct that nothing will happen before the 2012 elections. Neither party has the desire to be portrayed in the press as having provided a tax break to large corporations.

U.S. Business Has High Tax Rates but Pays Less - NYTimes.com