Awarded money in a lawsuit or settlement? It’s only tax-free in certain circumstances
- ByPolk & Associates
- Mar, 03, 2023
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You generally must pay federal tax on all income you receive but there are some exceptions. For example, compensatory awards and judgments for “personal physical injuries or physical sickness” are free from federal income tax under the tax code. This includes amounts received in a lawsuit or a settlement and in a lump sum or in installments. However, not all awards are tax-free. For example, punitive damages and awards for unlawful discrimination or harassment are taxable. And the tax code states that “emotional distress shall not be treated as a physical injury or physical sickness.” If you receive a court award or out-of-court settlement, consult with us about the tax implications.
Influencer marketing could help your business (or not)
- ByPolk & Associates
- Mar, 03, 2023
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Most business owners who are active on social media would likely agree that building a following and getting meaningful reactions to posts isn’t easy. One way that some companies rise above the din is to not only market themselves on social media, but also engage an “influencer” to do it. Some influencers are famous celebrities; others are just high-profile experts in their fields. Under the right circumstances, just one image or video with a few positive words from an influencer can boost sales. But influencer marketing isn’t for everyone. You’ll need to vet prospective endorsers thoroughly, as well as carefully structure the contract to mitigate risk and ensure a return on investment.
Buying a new business vehicle? A heavy SUV is a tax-smart choice
- ByPolk & Associates
- Mar, 03, 2023
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If you’re buying or replacing a vehicle that you’ll use in your business, be aware that a heavy SUV may provide a more generous tax break this year than you’d get with a business car. New and used heavy SUVs, pickups and vans acquired and put in service in 2023 are eligible for 80% first-year bonus depreciation. However, you must use the vehicle more than 50% for business. If your business use is 51% or more, you can deduct that percentage of the cost in the first year the vehicle is placed in service. This tax break is available only if the manufacturer’s gross vehicle weight rating is above 6,000 pounds. Contact us to help evaluate if this is the right move for your business.
There still may be time to make an IRA contribution for last year
- ByPolk & Associates
- Mar, 03, 2023
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If you’re getting ready to file your 2022 tax return, and your tax bill is higher than you’d like, there might still be an opportunity to lower it. If you qualify, you can make a deductible contribution to a traditional IRA right up until this year’s April 18 filing deadline and benefit from the tax savings on your 2022 return. For 2022 if you’re qualified, you can make a deductible traditional IRA contribution of up to $6,000 ($7,000 if you’re 50 or older). To be qualified, you must meet rules involving your income and whether you (or your spouse) are an active participant in an employer retirement plan. If you want more information, contact us or ask about it when we prepare your return.
Do you run a business from home? You may be able to deduct home office expenses
- ByPolk & Associates
- Mar, 03, 2023
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One result of the COVID-19 pandemic is that many people now work from home. If you’re self-employed and run your business from home or perform certain functions there, you may be able to claim deductions for home office expenses against business income. There are two methods for claiming deductions. With the actual expense method, you claim direct expenses, such as the cost of painting and a proportionate share of indirect expenses, such as utilities, insurance and depreciation. With the simplified method, you deduct $5 per square foot of home office space, up to $1,500. Unfortunately, employees can’t deduct home office expenses. We can help you determine if you qualify and how to proceed.