This is G&G Associates Tax & Financial Consulting Services e-newsletter. Claiming Two Cars in Your Business

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1 This is G&G Associates Tax & Financial Consulting Services e-newsletter Karibu (Welcome) G&G Readers, Do you have two cars in your household? Claiming Two Cars in Your Business Are you like most taxpayers and claim business tax deductions on just one car? If your circumstances are right, you might find a hefty increase in deductions with the two-car strategy. To implement this tax strategy, you don t have to drive one mile further. You don t have to spend one additional penny. All you need are the right circumstances and a desire to increase your tax deductions. Click on link for G&G Associates commercial: Internal Sponsorship: G&G TAX PREPARATION SERVICES G & G Associates is a Black-Owned Business focused on easing our client's minds on tax compliance matters. With the ever changing and burdensome tax code, overwhelming and confusing federal and state tax forms and increasing IRS scrutiny over most tax items, taxpayers need to have at least this one part of their lives made easier, less stressful and more profitable. Our expert help includes our: In-Depth Interview a thorough and complete experience designed to unearth every tax savings opportunity during the course of your tax preparation. We use these to the latest IRS guidelines to guide you through a painless, interactive session so that together, we catch every single detail that results in more tax savings for you. We can service clients anywhere in the world and we look forward to assisting you in getting your tax return prepared for the 2010 and beyond tax season. (Referrals available upon request) If you are a returning client you'll get a 25% discount off your tax preparation fees. If you are a

2 new client you'll get $40 off our normal fees. If you are active duty military you'll get a 15% discount. If you are a senior citizen (above 65) you'll get a 50% discount. At G&G Associates, we GUARANTEE to beat "ANY" other tax professional s fees. We take pride in not nickeling and diming our customers with unnecessary charges & fees. Do you have a friend, co-worker or family member who might be interested in G&G Associates Tax Preparation Services? If so, then you can earn $40 for everyone you refer that files their tax returns with us. Just refer that person, and when we complete their tax return we will send you a check for $40. To make the deal even sweeter, after (4) four referrals you will get your taxes done for free. For INSTRUCTIONS on how to get your taxes prepared visit our website, click on the "TAXES" tab and then download the "Tax Preparation Worksheet," or the left side of the page or click on the following link: Right Circumstances for Single and Married Taxpayers If you are single and drive more than one vehicle, this tax strategy has a high probability of producing more tax deductions for you. You will want to stick your numbers in our car deduction formula below to know for sure. If you are married, answer the following three questions: 1. Do you drive more miles than your spouse? 2. Are most of your miles business miles? 3. Are both vehicles comparable in value? If you answered yes to each of the three questions, you have a high probability of benefitting from this two-car tax strategy. You will want to insert your numbers in the easy-to-use formula below to know for sure. Car Deduction Formula I m about to show you a formula that tells you if you can pocket some tax money from the twocar strategy. What makes the formula easy is that it requires you to produce only the following four easy numbers: 1. Business miles

3 2. Total miles 3. Cost of vehicles 4. Estimated sales proceeds when sold That s it. With the above numbers, you can determine what s best and by what percentage. First, let s look at an example of how the magic formula works. In the example below, Jake Doe finds a 39.2 percent advantage to driving two vehicles for business rather than one. Before After Car 1 Car 2 Car 1 Car 2 Business miles 28, ,000 14,000 Total miles 30,000 8,000 19,000 19,000 Business % 93.3% 0.0% 73.7% 73.7% Cost of cars $23,000 $21,000 $23,000 $21,000 Estimated sales proceeds $2,000 $5,000 $3,500 $3,500 Loss in value $21,000 $16,000 $19,500 $17,500 Tax deductions $19,593 $0.00 $14,372 $12,898 Totals $19,593 $27,270 Advantage $7,677 or 39.2% more with two cars I don t know if Jake is single, married, or operates as a corporation. I don t care. The formula does the work and gives the advantage or disadvantage to using the two-car strategy. Easy Elements in the Formula Business miles. Start with the before column and you will see that Jake drives Car 1 28,000 business miles and does not drive Car 2 for business. Now, look at the after column. Here, Mr. Scott switches cars each week and drives each car 14,000 miles for business. Total miles. Total miles reflect both business and personal use. Business percent. In the before column, Jake drove one car 93.3 percent for business, but in the after column Jake drives both cars 73.7 percent for business. Cost of cars. You likely know what you paid for the cars, and that makes putting the numbers into the formula easy. Caution. Because you are stuck with IRS mileage rates for the life of a lease, the formula does not work on a leased car that you deduct using mileage rates.

4 Estimated sales proceeds. Here, you enter the estimated net proceeds you expect from the sale of the cars. The sales happen at some date in the future, so you are going to have to make an informed guess. Tax deductions. The difference between purchase price and sales proceeds gives you the net cost of owning the car. When you multiply the net cost by your business percentage, you have the net tax deductions for this vehicle. On your tax returns, the tax deductions are claimed and adjusted by the following: - Depreciation - Section 179 expensing - Gain or loss on sale When you tally the three tax elements above, your net result equals the business percentage of the net cost of the car. Advantage. The formula gives you the results expressed both as a dollar amount and as a percentage. In many cases, this is the minimum advantage for the period of ownership considered. How IRS Mileage Rates Work If Jake used IRS mileage rates on the vehicles in the example above, the formula would produce the same two-car advantage: $7,677 or 39.2 percent. You might think that can t be, but it is. Here s why: You calculate your tax benefit as the business part of the net decline in your vehicle s value. This decline in value is the net tax deduction you achieve on your tax return after the sale of the vehicle. You have this decline regardless of deduction method (IRS mileage rates, actual expenses, or Section 179 expensing). The 2011 IRS mileage rate of 55.5 cents a mile includes 22 cents of depreciation. Thus, you have depreciation with either the actual-expense method or the IRS mileage-rate method. The depreciation in the IRS mileage rate reduces your car s basis. The marketplace reduces your car s resale value. For tax purposes, at the time of sale, you compare your business selling price with your basis to calculate your tax gain or loss on sale. Once the gain or loss is considered, your net tax deductions on your tax returns equal the business percentage of the vehicle s net decline in value.

5 Example. You buy a car for $25,000, use it 100 percent for business, drive it 90,000 miles, and sell it for $5,000. Your decline in value is $20,000 ($25,000 purchase price minus $5,000 selling price), and net tax deductions total $20,000 ($19,800 in IRS mileage rate depreciation plus a $200 loss on sale). Thus, the math works with IRS mileage rates just as it does with actual expenses. Actual Expenses Could Produce More Benefits When you use actual expenses to deduct your vehicles, you might find an even greater benefit than we measure in the formula. Here s an example: Say you pay $1,000 per year per car for insurance. If you drive one vehicle 90 percent for business, your car insurance deduction is $900 (90 percent times $1,000), but if you drive two cars 65 percent for business, your car insurance deductions are $1,300 ($1,000 times 65 percent on car 1, plus $1,000 times 65 percent on car 2). Visit our website or contact us today to set your appointment if you need a TAX OR FINANCIAL one-on-one consultation. If you missed any past G&G newsletters, click on link below for the archive: Metta (Wishing You the Best), Asar Gary Gray Tax & Financial Consultant, RFC G&G Associates office toll free fax G&G Associates & G&G Travel are on Facebook, join our fan page. **You must be a G&G Associates tax client to receive the $40 referral fee *** [Price Guarantee does not apply to individuals, corporations or partnerships filing refunds pertaining to Revenue Ruling / , Ponzi Schemes or VA Amendment CFR ] P.S. If you're not a GGIS Paid Subscriber reader yet, why not? Currently, our GGIS portfolio is packed with great plays to kick-start your portfolio for 2011.

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