Navigating business-vehicle expense deductions can be tricky

If you operate a business, you can generally deduct expenses for the business-related use of your personal vehicle. There are two ways to determine the portion of your overall expenses that’s attributable to your business use for the current year: 1) the actual expense method, or 2) the standard mileage rate.

The actual expense method allows you to deduct expenses attributable to business use of the vehicle, including gas, insurance, and license and registration fees. Alternatively, you can use the standard mileage rate approved by the IRS. This figure is updated annually. The rate is 67 cents per mile for 2024. If you use this method, it’s critical to keep detailed records, including the mileage for each trip and the business purpose of the travel.

Have you made contingency plans for your beneficiaries?

Sometimes the best laid estate plan can go awry. This can happen if a beneficiary predeceases you. To avoid having state law dictate who receives your property, name contingent beneficiaries on retirement accounts and insurance policies. In addition, ensure that your will or trust is clear on what happens if an heir predeceases you.

Suppose you’re splitting your assets equally between your two children. If one of them dies, what happens to his or her share? If your plan (or state law) provides for assets to be distributed per capita (“by the head”), they’ll go to the surviving child, potentially disinheriting your grandchildren. In contrast, if assets are distributed per stirpes (“by the branch”), then half will go to your surviving child and the other half will go to the deceased child’s family.

Harvest your portfolio’s gains or losses

Before year end, assess your investment portfolio and implement year-end investment strategies that can potentially minimize your tax bill. A tried-and-true strategy is harvesting gains or losses. Keep in mind that although the value of various investments may rise or fall during the year, these gains and losses exist only on paper and aren’t “realized” until you sell.

If you’ve realized net capital gains for the year, they’ll be taxed at rates as high as 20% for long-term gains and 37% for short-term gains. You also might owe state income tax and the 3.8% net investment income tax. To avoid this tax bite, consider “harvesting” available capital losses by selling investments that have declined in value and using the losses to offset your gains — but beware of the “wash sale rule.”

© 2024