Monthly Archives: September 2015

   When to Lease Business Equipment Instead of Buying

As things stand now, the tax breaks for buying depreciable business property have been watered down for the 2015 tax year.

Consider leasing business equipment instead of buying it. Generally, you can write off the entire cost of leasing without a huge upfront commitment.

Also, leasing isn’t forever. If the tax breaks for buying property are revived, you may be able to quickly cash in.

Here’s the whole story: Currently, the maximum Section 179 deduction is only $25,000 for property placed in service in tax years beginning in 2015, down from $500,000 in 2014. In addition, 50% bonus depreciation generally isn’t available for assets placed in service in calendar year 2014.

When you lease equipment, it’s often under a fair market value lease (or a “true lease”). This gives you the option to return the equipment at the end of the lease term with no obligations. You can walk away, or if you want to continue to use the equipment, you can renew the lease or buy the equipment at the going price.

With that type of true lease, you can deduct your annual lease payments in full. That may be preferable to buying equipment that will result in multiyear depreciation deductions. For example, a three-year lease may provide more valuable tax benefits than equipment that must be depreciated over seven years.

Furthermore, the alternative minimum tax (AMT) may limit your depreciation deduction for equipment purchases. In contrast, the AMT doesn’t reduce deductions for leasing equipment. Therefore, if your company can’t take full advantage of the tax benefits of owning equipment, leasing may be a better option.

5 nontax benefits of leasing

There are at least five nontax advantages of leasing over buying equipment.

  1. Smaller capital outlay: Leasing requires a lower upfront cash expenditure than the 10% to 20% down payment often required for purchased equipment. As a result, your business can keep more cash on hand for other purposes.
  2. Keeping up-to-date: When you buy equipment, you run the risk that it will become obsolete before the end of its useful life. But leasing usually provides three options at the end of the lease term: Renew the lease, buy the equipment or just walk away.
  3. Short-term goals: If your company only needs the equipment for a relatively short period of time, leasing could be the way to go. Conversely, if you buy the equipment, you’ll have to recoup part of the cost through a resale.
  4. Lower acquisition costs: Certain types of equipment may be more available at a reasonable price from leasing companies. Plus, leasing may speed up the acquisition process.
  5. Favorable accounting procedures: Notably, certain equipment obtained via a lease may not need to appear on your company’s balance sheet. That, in turn, can help your overall financial picture with lenders and potential investors.

When you add up all these factors–including both tax and nontax considerations–it often doesn’t pay to buy business property that will be outdated relatively soon.

Of course, leasing isn’t always the best option. Buying equipment may still be a smart move in many cases, especially if you get a good deal on the purchase and you expect to use the equipment for most of its useful life. Also, depending on your situation and whether Congress extends depreciation tax breaks through 2015, the tax benefits of ownership may be too attractive to ignore. A Dallas CPA can walk you through what make sense for your business.

Gurian Dallas Accountant    Tax Deductible Donations Go Further on North Texas Giving Day

As we get closer to the end of the year, charitable organizations and nonprofits start gearing up for year end fundraising, since many people wait until the end of the year to make their tax deductible donations. The holiday season tends to bring out more charitable attitudes of the general public. However, North Texas has a unique event each September that allows taxpayers to make their donations go further.

North Texas Giving Day

Thursday, September 17th marks the 7th annual North Texas Giving Day, when donations will be “amplified by more than $2 million dollars in bonus funds and prizes”. This is an easy way to support your favorite local organizations, with the ability for the non-profits to increase their reach in the community they serve.

Over 2,100 local nonprofits participate in the online giving event, with the ability to search for organizations by name or cause on the site at www.NorthTexasGivingDay.org

The site also allows for you to make all of your charitable donations at once to multiple organizations, receiving a detailed email receipt after your donation is processed.

Company Matching

Does your company match donations you make? This is another great way to support your favorite causes and give them an extra boost in funds. North Texas Giving Day donations are also eligible for company matches. When your company sends their matching gift to Communities Foundation of Texas, they will send a check to the nonprofits you supported.

Record-keeping

As is always the case, be sure to keep receipts and records of your donations to charities.

There are some pieces of information that may be included in receipts and giving statements:

  • Name of the organization.
  • Date of the donation.
  • Amount of the donation.
  • Statement that no goods or services were provided by the charity in return for your donation (if that was the case).

Come April when it’s time to do your taxes, simply give your printed email receipt to your Dallas CPA and we can add your donations to your deductions on your tax return. Gurian CPA Firm is a midsize Dallas CPA Firm that offers accounting, payroll, and tax services to individuals and businesses. Contact us today for a consultation.

For more information about North Texas Giving Day and how your donation can help go to www.NorthTexasGivingDay.org

   Job Search Expenses May be Tax Deductible

People often change their job in the summer. If you look for a job in the same line of work, you may be able to deduct some of your job search expenses. Here are some key tax facts you should know about if you search for a new job:

  • Same Occupation.  Your expenses must be for a job search in your current line of work. You can’t deduct expenses for a job search in a new occupation.
  • Résumé Costs.  You can deduct the cost of preparing and mailing your résumé.
  • Travel Expenses.  If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.
  • Placement Agency. You can deduct some job placement agency fees you pay to look for a job.
  • First Job.  You can’t deduct job search expenses if you’re looking for a job for the first time.
  • Substantial Job Break.  You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.
  • Reimbursed Costs.  Reimbursed expenses are not deductible.
  • Schedule A.  You usually deduct your job search expenses on Schedule A, Itemized Deductions. You’ll claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.

If you’re not sure which job search expenses are tax deductible, be sure to include them with your tax documents when you meet with your Dallas CPA at tax time. Your tax preparer can determine which expenses are eligible and include them on your tax return on Schedule A.

   Why File Married Filing Separate?

One of the first questions asked when preparing a tax return is how to file: married filing jointly, or married filing separately? The way the tax code is written, married filing jointly usually results in a lower tax bill than if filed married filing separate. For this reason, the IRS generally advises spouses to file jointly.

While a vast majority of couples file jointly, there may be instances when it makes sense to file separate.

When It May Be Best to File Jointly:

You have children. Certain miscellaneous deductions and credits do not apply to married filing separately taxpayers. Those include the childcare tax credit, adoption credit, earned income credit (EITC), and education credits (student loan interest included). See here for the full list.

One spouse earns a majority of combined income. Married filing jointly has the advantage of double the deductions for certain expenses, most importantly, for contributions to retirement savings accounts. Filing jointly allows a couple to reduce their tax bill and increase their retirement nest egg, a win-win all around.

When It May Be Best to File Separately:

You are going through a divorce or separation. As long as you’re married filing jointly, each spouse is responsible for taxes or penalties owed to the IRS. Meaning, if your estranged spouse agrees to pay the tax, and they don’t, the IRS can come after you to collect the bill.

Your spouse has prior or ongoing tax issues. As mentioned above, each spouse is legally and financially responsible for tax due to the IRS if filing married jointly. Filing separately means you’re not on the hook for your spouse’s tax issues, and if any future issues arise, you may qualify for Innocent Spouse Relief to shield you from any of their transgressions.

Your income is about equal. In some cases, filing jointly may end up pushing you and your spouse into a higher tax bracket and thus owe more tax than if you filed separately. It may be worth taking a look at the tax brackets to see if this may be the case, and speak with your Dallas CPA to find out if married filing separately would be more beneficial.

In the end, many couples do find that filing jointly is the best case scenario. However, if you find yourself in a unique situation where filing separately could be more advantageous, it’s best to consult with your tax preparer to make sure to make the most of the available tax credits and deductions.