Make withholding adjustments midyear
Q. I changed my W-4 earlier this year, and now I want to change it again. Can I do it? A.R., Philadelphia
A. Yes. There’s no limit on the number of times you can change a Form W-4, Employee’s Withholding Allowance Certificate, during the year. What’s more, you have wide latitude to increase or decrease the withholding amount listed on your current W-4, although you technically can’t exceed the number of allowances you’re entitled to. Go through the work sheet. There’s no expiration date on the form either, so it remains in effect until you change it, if ever.
Tip: The IRS recently posted information on W-4 adjustments for certain events. (IRS Summertime Tax Tip 2015-10, 7/24/15)
Wrong turn for state ‘exit tax’
Q. Is there an exit tax on home sales when you move out of state? M.T., Ramsey, N.J.
A. Not exactly. This is the name used for a New Jersey statute requiring former residents to pay an estimated tax generally equal to 2% of the capital gains from a home sale. This “exit tax” was designed to prevent residents from moving out of state without paying the appropriate capital gains tax. But the law is littered with exceptions, including one for the sale of a principal residence. A refund is available when you file your return.
Tip: Other states, notably California and New York, have aggressively pursued tax on pensions and income from other sources earned by former residents.
Shifting gears on business car deduction
Q. Should I change my deduction method for a business car if my travel has been drastically reduced? R.F., Santa Barbara, Calif.
A. Maybe. Generally, the actual expense method for deducting business car expenses is preferable to the standard mileage method (57.5 cents per business mile in 2015) if you travel relatively little. The main reason is that you get the full benefit of depreciation deductions with the actual expense method regardless of the number of miles traveled. Compare the results based on the available records.
Tip: You can’t switch back to the standard mileage method next year if you claim accelerated depreciation this year.
Can you tack sales tax onto ?
Q. We’re buying new depreciable equipment for our business. Does sales tax count under the? G.A., St. Paul, Minn.
A. Yes. When you write off an amount under Section 179, the deduction includes any sales tax required on the cost of the equipment. Currently, the maximum Section 179 deduction allowed for tax years beginning in 2015 is only $25,000. If Congress doesn’t retroactively increase this amount and you exceed the $25,000 limit, any remaining sales tax is added to the basis of the equipment and must be depreciated over time.
Tip: The full cost of equipment qualifies for the Section 179 even if you finance the purchase.
- Small Business Tax Deduction Strategies No matches