As we approach year end, many CPA’s and tax preparers will begin to get the “frequently asked tax questions”. Accordingly, I want to address some of them and provide readers the opportunity to gather this information now. In my experience at Fragnoli & Company, CPAs in Brentwood, TN and during my tenure with other firms, the most frequently asked question pertains to mileage rates. The 2013 standard mileage rate for business mileage is 56.5 cents per mile. For medical and moving mileage, the rate is 24 cents. For charitable services, the related mileage rate is 14 cents. http://www.irs.gov/uac/2013-Standard-Mileage-Rates-Up-1-Cent-per-Mile-for-Business,-Medical-and-Moving.
Another common question pertains to the write-off of new equipment purchases, also known as section 179 depreciation, and in particular, how it applies to the purchase of a new vehicles. Large SUVs and trucks with a gross weight greater than 6,000 pounds are eligible for the write-off of $25,000 of the purchase price (at least as currently reported by the IRS). Other equipment, personal property fixtures and furniture can be fully written off in the year of purchase up to $500,000 worth subject to certain total personal property capital asset additions and income limitations. http://www.section179.org/section_179_deduction.html. One very useful tax planning tool is the eligibility for section 179 depreciation on leased equipment. Leased equipment with $1 to 10% buy-outs, also known as non-tax capital leases, are eligible for section 179 and are frequently overlooked. So if your business has entered into a lease of this type in 2013, or planning on entering into one of these leases, consider this tax advantage.
Finally, the single most overlooked deduction/ credit is the is the Domestice Production Activities Deduction. Many enterprises qualify for this and don’t even realize it. If you are in construction, manufacturing or related services, you may qualify for this significant deduction. Last year I prepared a tax return (an amended the prior year, which I did not prepare) for a new client that was not aware of this deduction, and neither was the predecessor accounting firm. This deduction resulted in significant tax liability reduction and refunds. Accordingly, be sure to review your situation closely with your tax compliance firm and ask about this deductions.