Tag Archives: accounting blogs

IRS Releases 2015 Standard Mileage Rates

The IRS has recently announced the 2015 standard mileage rates available for use in calculating the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Starting January 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be 57.5 cents per mile for business miles driven, which is up from the 56 cents per mile currently allowed in 2014. In addition, the rate will change to 23 cents per mile driven for medical or moving purposes, which is actually down half a cent from the 2014 rate. The rate for charitable miles driven will remain at 14 cents per mile as this rate is fixed by Congress.

Mileage_Car
Some may wonder why there is such a difference between the business miles rate and the rate for medical or moving purposes. The reasoning behind this is that, in calculating the rate for business miles driven, the IRS uses an annual study of the various fixed and variable costs associated with operating a vehicle. These costs include depreciation, insurance, repairs, tires, maintenance, gas and oil. As inflation causes the cost of many of these expenses to rise, the IRS adjusts their rate for business miles accordingly. In contrast, the rate for medical and moving purposes is based only on variable costs, like gas and oil. As we have all noticed, prices at the pump have dropped considerably in recent months. In fact, the U.S. Department of Energy predicts the average price for a gallon of gas to be $2.60 in 2015, the lowest full-year average since 2009. As a result, the rate for medical or moving purposes has decreased to account for this expected drop in gas prices.

It is important to remember that these standard mileage rates are optional, and taxpayers always have the option of deducting their actual costs incurred with operating a vehicle. While deducting the actual costs may require more work, due to the increased recordkeeping required, in many cases the actual costs method provides the greatest benefit. It is also important to note that, when choosing to use the standard mileage rates, taxpayers should always keep an accurate and detailed log of their miles traveled for business, charitable, medical or moving purposes.

By: Ruben Becerra, Staff Accountant

Tax-Free Employee Fringe Benefits

fringe_benefitsEmployer-provided fringe benefits can be an important part of an overall compensation package. Highly valued by employees, benefits are even more prized when they fall under an exception from being taxed. Below is a generalized, non-inclusive listing of some of the most commonly provided tax-free benefits. In most cases, they are not subject to social security or FUTA tax as well.

• Accident or health insurance premiums, including contributions to health savings accounts (HSAs)
• Achievement awards—property given for length of service or safety achievement
• Personal use of a company-provided cell phone provided primarily for business use
• Holiday gifts (non-cash) with a nominal fair market value
• Occasional parties or picnics for employees
• Coffee, doughnuts, or soft drinks provided on the employer’s premises
• Occasional meals or meal money provided to enable the employee to work overtime
• Group term-life insurance (limited)
• Educational assistance up to $ 5,250 under a formal written plan
• Reimbursement of deductible moving expenses
• Employee discounts on property or services you offer to your customers
• Qualified transportation benefits, including transit passes or qualified parking
• Reimbursed job-related expenses incurred by an employee under an accountable plan
• Contributions to qualified retirement plans
• Advice concerning the above retirement plan, and retirement planning in general

Note that cash and cash-equivalent fringe benefits (such as gift cards, prepaid cards, etc), no matter how small, are never excludable. They must always be included in the employee’s payroll amounts.

Many of the above items are tax-exempt only if paid under a formal, written plan which does not discriminate. Also, benefits are often limited for company owners, partners, and highly compensated employees.

If any of the above might be a useful addition to your company’s compensation package, be sure to contact your WVCO tax pro for details in implementing the benefit.

By: George Monger, Senior Manager

179D and Its Benefits for the Construction Industry

179d

You probably have encountered section 179 and the accelerated depreciation benefits it provides. However, we have found the familiarity with section 179D to be greatly limited. This is discouraging considering the substantial benefits it can provide to those in the construction industry. Let’s take a brief look at 179D and highlight its advantages.

What is Section 179D?
It is a provision for energy efficient commercial buildings built or upgraded with energy efficient improvements after 12/31/2005. The maximum deduction available is $1.80 per square foot and acts as an accelerated depreciation deduction. The calculation for the deduction (up to the maximum) is based upon the interior lighting, HVAC, building envelope costs and efficiencies. This is certainly a nice benefit for building owners. However, the greatest tax savings are obtained by those in the construction industry, including engineers and architects.

Permanent tax benefit
As I eluded to earlier, the 179D deduction is inherently an acceleration of depreciation. Nevertheless, this deduction becomes more than an accelerated deduction for those in the construction industry. Why? The IRS realizes that governmental entities cannot benefit from this deduction due to their tax-exempt status and allows them to allocate (essentially transfer) the deduction to the responsible party for designing the property. This means that this deduction is a permanent benefit (once transferred) that would not otherwise be attainable by the designer. It is a method that reduces the tax burden on each governmental project and increases the after tax earnings for those firms that choose to take advantage of this opportunity.

Please contact your William Vaughan Company representative for further information and for guidance on the facilitation of this deduction.

By: Nate Bernath, CPA