Are You Ready for a Disaster?
Summer brings with it the potential for disastrous weather, including hurricanes and tornadoes. Depending on your location, hurricanes may not be a threat; however, every place can suffer the havoc wreaked by tornados or, at the very least, powerful storms. It’s up to you to take steps to ensure you are prepared… and that includes safely storing your tax and important documents.
Here are a few tips to help ensure safe storage of your tax and other financial records:
- Take advantage of technology: It’s very likely that your bank statements are already archived online at your bank’s website, so you can access them there. It’s also a good idea to scan your tax records and insurance policies and store them digitally, if they are not already stored that way. Copy the digital files you create onto a removable medium (DVD, CD, USB drive, etc.) and ensure that it is safely stored away from the originals. In the event of an evacuation, it will be easy to grab and take with you. Or store it in a bank safe-deposit box. You may also want to scan and store any receipts and documents that you have already accrued this year to use for your 2015 tax filing.
- Create Documentation: Shoot photos or video of your home and its contents (and your business and its contents). You may need this evidence to prove loss both to your insurance company as well as the IRS next year to claim a casualty loss on your 2015 return. As with your documentation, store this in a safe place and in a format that will be simple to “grab and go” in case you need to evacuate.
- Get Relief: If you do become the victim of a weather-related disaster, remember that you may be able to get tax relief from the IRS. Click here to read the tax relief specifics for recent and past disasters.
If you should need to get copies of your prior year tax records, you will need to file Form 4506. The fee to get a copy of a previous return is $50.00; however, the IRS will waive the fee if you are in a federally declared disaster area. If you simply need information from most line items from your return (rather than the return itself), you can request a free transcript with IRS Form 4506-T (Form 4506-EZ for those who filed 1040-EZ) or by calling 1-800-908-9946.
Disasters aren’t limited to the weather. Fire, broken pipes, and theft can strike at any time. If you are affected by one or more of these events, you may be able to claim a casualty loss on your tax return. Here are the steps to determine if you will be able to take a deduction:
- Determine your cost or other basis of the property before the casualty or theft.
- Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. (The decrease in FMV is the difference between the property’s value immediately before and immediately after the casualty or theft.)
- From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive.
- Subtract $100 from each casualty or theft loss ($100 rule).
- Finally, subtract 10 percent of your adjusted gross income from the total of all your losses (10% rule).
The final number is the amount you can take as a deduction on your tax return.
Vehicle Use Tax Deductions
You may be able to take a tax deduction for the miles you drive if you drive for business or for qualified medical, moving or charitable volunteer purposes. Keep in mind that commuting (driving to and from your place of employment) is not deductible. However, driving between your primary job and a part-time job or school can be deducted.
If you drive deductible miles, you’ll need to choose how you want to take the deduction: either standard mileage rate or actual cost method.
Standard Mileage Rate
The IRS sets a standard mileage rate each year. The current rates are 57.5 cents per mile for business miles driven, 23 cents per mile for qualified medical/moving purposes, and 14 cents/mile for charitable volunteer miles you may drive.
You will need to keep a log of any deductible miles you drive. Check out Miles Trac (Android) or MileIQ (iPhone or Android) or another smart phone app for this purpose. It doesn’t need to be fancy: pen and paper also work, but you may want to check your office supply store for a mileage tracking form, so you don’t overlook any needed details.
To take the deduction, you will also need to report your total miles driven for the year, the total miles driven for deductible purposes, and the date on which you placed your car into service.
The second method for deducting allowable miles is to track the actual cost of operating your vehicle including gas, repairs, maintenance, lease payments, insurance, etc. You will also need to determine the percentage of your driving that is deductible as you may only deduct costs that reflect the percentage of your deductible driving. If 50 percent of your driving is deductible, you may only claim 50 percent of the cost of operating your vehicle.
You may also claim depreciation if you use the actual cost method, but there are depreciation limits:
- Passenger Auto – A passenger auto is any four-wheeled vehicle that is made primarily for use on public streets, roads and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (GVW). The depreciation limit is $3,160.00 for the first year, $5,100.00 for the second year, $3,050.00 for the third tax year, and $1,875.00 for each year thereafter.
- Trucks and Vans – Trucks and vans are subject to different Section 280F limits than cars. A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and has a loaded GVW of 6,000 pounds or less. The first year depreciation limit for trucks and vans is $3,460.00 ($5,600.00 for the second year, $3,350.00 for the third year, and $1,975.00 for successive years).
- Special use vehicle – Used in transporting persons or equipment in a trade or business (e.g. ambulance, hearse, taxicab, etc.) Contact us to discuss the details of using the actual cost method for deductible allowances on these types of vehicles.
If you are uncertain which mileage deduction method makes the most sense for you (and your business), please contact us, and we’ll be happy to work through the calculations for you, so you can take the highest deduction possible.