Fruity Facts You Didn’t Know about Tax Exemptions

If you file your tax return, you can’t help but love the different exemptions allowed by IRS. After all, these exemptions reduce your tax burden. In fact, if you are in the lowest tax bracket, the aggregate exemption which you can claim could also bring your tax liability to zero!

IRS allows two types of exemptions when you are computing your tax liability. These exemptions are as follows:

1. Personal exemption which is allowed for yourself and your spouse
2. Exemption for dependents which is allowed for dependent children and qualifying relatives.

Do you know the amount of exemption you can claim in your return? For the year 2016, each deduction that you can claim is $4050. While you might know that both personal and dependent exemptions help in lowering your taxes, here are some fruity facts you didn’t know about these exemptions:

You can claim your spouse as a dependent when filing jointly

Your spouse is never considered your dependent. However, if you are filing your tax under the ‘married filing jointly’ tax status, you can claim one exemption for yourself and one for your spouse.

You can claim your spouse’s exemption even after he/she dies

If your spouse dies in any year, you can claim an exemption for your spouse on your tax return for that year if you are filing your tax jointly. However, if you are filing your taxes separately, you can claim your dead spouse as a dependent only if your spouse did not have any income, was not filing any tax return himself/herself and was not claimed as a dependent of another tax-paying individual.

You would be eligible for a double exemption if you remarry in the year of your spouse’s death

If you remarry in the year your spouse died, you can be included as a dependent in your dead spouse’s return filed separately and also on your new spouse’s return which should also be filed separately. Thus, you can bestow double exemptions.

You can claim any number of exemptions

Besides availing exemptions for yourself and spouse, you can also claim exemptions for dependent children and dependent relatives. In case of exemptions for dependents, there is no maximum limit. You can claim exemptions for every child you have and also for every relative who qualifies the IRS dependency test.

A child born on the last day of the year can also be claimed as a dependent

If you deliver a baby on 31st December which is the last day of the financial year, the child would qualify as your dependent and you can claim an exemption for the new born baby too even if the baby has been with you for only a day in that particular year.

Exemptions are dynamic in nature

Yes, it is true. The amount of each exemption allowed by the IRS changes every year with the latest being $4050. The exemption in 2015 was $4000 while in 2014 it was $3950. So, the amount of exemption increases every year which is very good for your tax liability.

Did you know these facts? Now you do. Exemptions are a great way to lower your tax liability and since there is no cap on the maximum exemption one can avail, you should enjoy them to their fullest possible potential.

Write Off Your New Car Used For Business Purposes

Like any areas of tax law, vehicle write offs can unfortunately be a little complex. Here, we’ll provide a quick run through to explain when new vehicles qualify for deductions and how much you can expect to expense.

Many people will be quit confused with lot of questions about tax deductions for vehicle purchases. Can I write off my new car? Does it make sense to purchase a vehicle now before the end of the year? Can I deduct the full amount?

When can you deduct new vehicle as a business expense?

Did you know that if you buy a vehicle with a Gross Vehicle Weight Rating (GVWR) over 6000 pounds you can deduct your vehicle (or part of your vehicle) as a business expense if it’s used mostly for your business. Seems pretty simple, but exactly how much you can write off varies depending on the type of vehicle and its use.

If you purchase a business vehicle that by its nature is not suited for personal travel (ambulance, hearse, cargo vehicles without seats, taxis, vehicles with seats for over nine passengers), you can generally write off the whole thing.

This doesn’t mean you can purchase a hearse, claim the full expense, and then use it as your personal vehicle. Personal use will still trump the kind of vehicle you purchase.

For passenger vehicles, trucks, and vans not meeting the guidelines that are used more than 50% in a qualified business use, the total deduction for depreciation including both the Section 179 expense deduction as well as Bonus Depreciation is limited for trucks and vans, you’re able to claim a portion of your expenses the year it was purchased and made available for use.

• Cars – up to $3,160 for regular depreciation
• Trucks and Vans – up to $3,460 for regular depreciation

Under Section 179 of the tax law, there’s a specific depreciation break for certain passenger vehicles with a gross weight between 6,000 and 14,000 lbs. If these vehicles are financed and meet proper conditions, you can qualify for expensing up to $25,000 the first year.

Regular depreciation can also be taken depending on the cost of the vehicle.

Here’s a list of vehicles that qualify under section 179, although this list is not exhaustive:

• Audi: Q7 TDI
• BMW: X5, X6
• Buick: Enclave
• Cadillac: Escalade
• Chevy: Silverado, Suburban, Tahoe, and Traverse
• Dodge: Durango and Ram pickup
• Ford: Expedition, Explorer, all F-Series pickups, Transit vans
• GMC: Acadia, Yukon, all Sierra pickups
• Infiniti: QX56
• Jeep: Grand Cherokee
• Land Rover: LR4, HSE, Sport
• Lincoln: MKT, Navigator
• Mercedes: GL 350 diesel, ML350, R350
• Nissan: Armada NV, Pathfinder 4-wheel drive, Titan
• VW: Touareg hybrid

In past years, there’s been an opportunity for additional deductions through bonus depreciation. Bonus depreciation for 2016 is not yet available, but this could change before the end of the year.