Haven't quite gotten around to filing your Form 1040 and arts and crafts Schedule C for this year? Here are some quick Form 1040 and Schedule C tax filing tips for the 2009 tax season:
- Business Standard Mileage Rate for 2009: 55 cents per mile. You can only use the standard mileage rate if you aren't using actual cost. For more information, see my articles on the subject of deducting the cost of your arts and crafts business vehicle.
- Section 179 Depreciation: For any arts and crafts assets you purchased during 2009, the 179 deduction limit is $250,000 as long as your total assets purchased during the year is under $800,000. Remember Section 179 depreciation can't be used to throw your Schedule C into a loss - it can only be expensed up to the point your business has 0 taxable income.
- Section 168(d) Bonus Depreciation: Originally only applicable for assets purchased before January 1, 2009, this IRC section was extended for assets purchased through January 1, 2010. You can take an additional 50% first-year depreciation for qualifying property. What's qualified property? Basically new property (new to you - ok to take bonus depreciation for used property you've purchased and placed in service) with a recovery period of 20 years or less.
- Self Employment Tax: Filed on Schedule SE it's 15.3% (12.4% OASDI and 2.9% Medicare Tax). OASDI is only figured on the first $106,800 of income. You combine all sources of income, including W-2s to see if you exceed the wage base. Remember though, if you file a joint return, you don't add your and your spouse's income together to calculate if you've exceeded the wage base. You both stand on your own.
- Sold Arts or Crafts Business Assets? Your maximum long-term capital gains rate is 15%. For those in the 10% and 15% income brackets, the capital gains rate is zero.
- Seeking to Offset Adjusted Gross Income with Self-Employed Retirement Contributions? Your IRA contribution limit is $5,000 if your filing status is married filing joint and your adjusted gross income is under $89,000 ($55,000 if you file as single or head of household). There are phaseout income levels. The deadline for contributions to a traditional IRA for the year is the due date of your return, not including any extensions of time to file.
And remember, these contributions go on the front page of the Form 1040 as an adjustment for adjusted gross income - not on your Schedule C. Please follow the IRA contribution link shown above for the complete facts about how to deduct your contributions.
- Another Expense That Absolutely Does Not Go on the Schedule C: Charitable contributions made by your arts and crafts business go on your Schedule A not the Schedule C.
The above is a very concise discussion of each topic. For more information, please talk to your tax return preparer or research the IRS web site using the following links:
