jump to navigation

When Leasing is Better Than Buying a Car | Tax Tip of the Week | No. 108 August 31, 2011

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a comment

Leasing vs. Buying a Car…..

Leasing can make sense for certain people in certain situations.  Leasing, however, isn’t for everyone. Here are some of the factors we consider when clients ask us whether they should lease or buy:

1. If you drive less than 15,000 miles per year, and if you buy a car every few years.
2. If you have a steady income stream, and/or
3. If you are self-employed and use the car for business.

When negotiating the price of the vehicle, make sure you don’t let the sales person talk you into making these mistakes:

Mistake #1: Not haggling over the cost of the car
The capitalized cost of the car is one of the critical starting points; negotiate the cost of the car before saying whether you want to buy or lease.

Mistake #2: Not paying attention to the residual value used in the lease calculations
The residual value (or buyout value) is the estimated fair market value at which the lessee may buy the vehicle at the end of the lease.  It pays to choose a car that retains its value since depreciation is the largest component of the cost of owning a vehicle.  So watch that residual value when negotiating car leases.

Mistake #3: Just give me the lowest monthly payment for a lease
Frequently, car dealerships get lessees to think only about the monthly payment, resulting in bad terms in other parts of the lease, like overage charges for driving over the contracted number of miles per year.

Mistake #4: Not noticing the interest rate used in the lease calculations
This interest rate is called the implicit interest rate of the lease, and it is important to get the best rate, just as if you were going to buy the car.

Mistake #5: Not negotiating the lease acquisition fee
The lease acquisition fee for a lease can run from several hundred to more than a $1,000, depending upon the automaker. Frequently, a lessee is told that there is no way to avoid this fee. This is sometimes true, but the dealer may say it could be reduced.

In these times of low interest rate financing, it pays to see if a properly structured lease, with a low implicit interest rate, is the best way to go.

Let us know if we can help.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

 

Do You Display a “Special Interest” License Plate on Your Car? | Tax Tip of the Week | No. 107 August 24, 2011

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , 3comments

An Overlooked Deduction

You can get a tax break when paying extra for a license plate that advocates a charitable cause.  For example, in Ohio there are several license plate options that promote Lake Erie, wildlife, etc.  These plates cost an additional $15 per year which goes to fund those charitable causes.  That $15 is a qualified charitable deduction that can be deducted on your Schedule A Form, if you itemize your deductions.

Do you display plates showing your pride in your Alma Mater or professional sports team?  If you purchase, for example, Ohio State University license plates you will pay an additional $35.  However, $25 of that fee goes towards the school’s scholarship fund and is tax deductible.  Feeling like the Big Red Machine is coming back?  Those Cincinnati Reds plates will cost you an additional $35 per year, but $25 goes to the United Way and is therefore tax deductible.

Now you can go out and make Ohio beautiful by displaying our natural resources, colleges and sports teams on your license plates—and get a deduction!

We love finding tax deductions like this.  Give us a call to see what deductions you may have missed.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

 

Paying Wages to Your Children | Tax Tip of the Week | No. 106 August 17, 2011

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a comment

Parents Employing Their Own Children

Payments for the services of a child under the age of 18, who works for his or her parent in a trade or business, are not subject to Social Security, Medicare, and Ohio Unemployment taxes, if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. 

If these payments are for work, other than in a trade or business, such as domestic work in the parent’s private home, they are not subject to Social Security and Medicare taxes until the child reaches age 21.   Payments for the services of a child under age 21 who works for his or her parent, whether or not in a trade or business, are not subject to federal unemployment tax.  Depending on the amount of payments for services, they could be subject to federal, state, school and city income tax withholdings.  

Paying wages to a child can be an effective income-shifting strategy for a taxpayer who owns a business or income-producing property.  Income may be taxed at the child’s lower rate, or escape tax altogether.  The child can contribute to a retirement plan.  If a child earns enough from the family business during college years, the child may be able to claim an education credit that the parents lose because of AGI limitation. Earned income is not subject to kiddie tax regardless of age. 

A child’s wages are deductible by the parent-employer only if:  (1) the work is done in connection with the parent’s trade of business (or income-producing property), (2) the child actually renders the services and (3) the payments are actually made.  The payments must be reasonable in relation to the services rendered.  Maintain records showing services performed and wages paid.   

Questions?  Just give us a call.   

Glenna Bradds – Author of this week’s TTW  

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website

Rick Prewitt– the guy behind TTW…until next week. 

Social Security Number Assignment Method Changed | Tax Tip of the Week | No. 105 August 10, 2011

Posted by bradstreetblogger in : Tax Tip, Taxes , add a comment

Social Security Update – Part 2

The Social Security Administration (SSA) has initiated a new method of assigning Social Security numbers (SSN) to new applicants. In the past, a person applying for a SSN would be assigned a number based on his or her geographic residency. The first three numbers of the SSN, known as the area number, were assigned to individuals in specific states.

Effected changes:  Beginning June 25, 2011 new applicants will be assigned a random number. The SSA will eliminate the geographical significance of the first three digits of the SSN. Randomization will also introduce previously unassigned area numbers for assignment.

Not changing:  The length of the SSN will remain at nine numeric digits. Also, the SSA will not assign area numbers of 000, 666, and between 900 and 999.  The group number, the fourth and fifth digits of the SSN, will not be assigned 00. Also, the serial number, the last four digits of the SSN will not be assigned 0000.

The new assignment process will only apply to those receiving a SSN for the first time. However, current number holders can receive a new number under the following circumstances:

• Sequential numbers assigned to members of the same family are causing problems.

• More than one person is using the same number.

• An individual has religious or cultural objections to a certain number or digits in the original order.

• A victim of identity theft continues to be disadvantaged by using the original number.

• Situations of harassment, abuse, or life endangerment.

Benefits:   Changing assignment methodology will extend the available pool of nine digit SSNs in every state. The SSA believes randomly assigned numbers will also protect the integrity of the SSN. In addition, randomization will protect an individual by making it more difficult to reconstruct a SSN using public information about that individual.

Editor’s Note:  Sounds like a good change to us.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Remember Those Social Security Statements You Receive Each Year Around Your Birthday? | Tax Tip of the Week | No. 104 August 3, 2011

Posted by bradstreetblogger in : Taxes, Taxes , add a comment

Social Security Update

Starting with those who had birthdays in July 2011, the SSA is going to discontinue mailing these annual projected benefit statements.  It is expected to save $30 million, this fiscal year, and $60 million, next fiscal year, by ending the mailings.

The SSA intends to resume sending the statements to those 60 and over next year.  For everyone else, the SSA is working on a download option.

It is a good idea to inspect your social security statements annually to make sure you are receiving the proper amount of earnings credits.  Until the download option is available, you can still visit the Social Security website  to inspect their excellent benefits calculator.

Who knows what you may or may not receive from social security in the future—-but for now, make sure it is calculating your benefits correctly.

Give us a call if you have any questions.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.