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December 2, 2018December 2, 2018

How to Take a Depreciation Deduction on Your Tax Return

How to Take a Depreciation Deduction on Your Tax Return

Depreciation refers to the income tax deduction which gives a taxpayer the chance to recover the cost of assets or property he bought and placed in service which means this is used in his business or trade. Fixed assets are assets that firms or businesses use to generate income. In such cases, the business owner doesn’t anticipate selling his asset in a year of buying it. Instead, the asset remains to be in service after the timeframe and will help generate a long term income. The residential real estate properties can be depreciated as well.

Some perfect examples of depreciable assets are vehicles, machinery, software and computers, furniture, buildings, and other standard pieces of office equipment.

Deprecation is difference from expense. Expenses of a business, which often include cash transactions like a business luncheon, are completely deductible within the year they were acquired. The expense of buying a tangible or fixed asset can be spread out and depreciated over several years.

Businesses choose how they will take a depreciation deduction. Either they can write off the cost as a form of expense or they can also deduct this as depreciation. When the business opts to write this off as a form of expense, the whole cost can be subtracted during the first year. They can also depreciate it then write off the value of the asset throughout its useful life expectancy. For instance, when a business buys an equipment piece worth $70,000, this can take the whole $70,000 in the first year or deduct $10,000 every year in a span of 7 years.

Time Periods to Calculate Depreciation

Different kinds of property are subject to different time periods over which they should be depreciated. The depreciation calculates how much value of the asset is going to be used up during these time periods. For instance:

Office equipment, computers, construction equipment, and light vehicles depreciate over a 5-year period.
Tractors and manufacturing tools depreciate over a 3-year period.
Miscellaneous assets and office furniture depreciate over a 7-year period.
Commercial real estate properties depreciate over a 39-year period.
Residential real estate properties depreciate over 27.5-year period.
Land improvements depreciate over a period of 10, 15, or even 20 years with a few exceptions.

Methods to Calculate Depreciation

The IRS Publication 946, How to Depreciate Property details thoroughly the methods for calculating depreciation. These include the following:

Accelerate depreciation – The depreciation’s bulk happens during the earlier years, with the later deductions becoming much smaller.
Straight-line depreciation – It is a straightforward and simple method but there is a limit in immediate gratification. Your biggest deductions will come later on. New businesses which are just starting out that expect to become more profitable after a few years often opt for this method where they defer the biggest deductions later on.
Section 179 expense deduction – It gives businesses a chance to take a deduction for the overall value of the asset or property during the initial year. There is a cap at the deduction at $500,000. When the deduction is bigger than the business’s income, the business will then carry the value’s balance over to the later tax years.

December 2, 2018

How Much Cash Do the Rich Have in Their Bank Account?

If you happen to know some rich individuals, you might be surprised to learn that many of them don’t really keep a lot of cash in their bank accounts. Many of them probably opt to spend on credit while others may take time in gathering funds to make a significant investment or big purchase.

How come such things happen when the rich are supposed to be rich in the first place?

Leverage Has Its Power

Just so you know, being rich doesn’t necessarily translate to holding on to lots of cash. The truth is, if you will just let your cash sit in your bank account, you will end up losing money daily because of inflation.

The rich know how they can leverage their credit score and wealth to make several smart investments possible to ensure the continuous growth of their wealth.

Let Money Do the Job

The main point here is to put your capital to work. Some of you may have overheard your rich friends saying how they use money to make money. This is exactly how the rich make the most out of the cash they got.

Liquidity Guaranteed

As expected, rich people will still have a considerable amount of cash ready at their disposal to meet monthly requirements, fund their lifestyle, and use for emergency needs.

They will also see to it that a sizable chunk of their investment portfolio is composed of liquid investments such as fund units and stocks they can exit from and transform into cash in a matter of several working days. It is also a means for them to grab a great investment opportunity right away when it comes their way.

Constant Search for Investment Opportunities

The rich are also constantly looking out for some investment opportunities where they can put their money into hoping they can build their portfolio and continuously grow their net worth.

Opportunities for investment don’t come knocking on doors every single time. This is why rich people often keep themselves up to date with the newest stock trends and business news.

Most importantly, they also have active social profiles and they mingle with those people who could have access to some good investment opportunities, including reliable finance managers or entrepreneurs. This explains why rich people love to attend social events, gatherings, and conferences.

The Rich Beat Inflation

The rich can deal with inflation through actively putting their cash to work as well as not allowing their money to just lay idle in their bank accounts. If they’re born rich, mindsets and concepts like these have probably been ingrained and passed down to them from their own parents and grandparents who learnt things the hard way.

As for the self-made affluent people, they would have learnt it from their own experiences or from their new rich friends who helped them during their climb to the top.

The Secret to Be Rich

So, if you are wondering how much cash the rich have in their bank account, the answer is not much. This is because they actively grow their wealth through placing their hard earned money into different worthwhile investments.

December 2, 2018

How Easy Is It To Get Rich?

Spending twelve years in school and another two to four years getting a high degree is not a complete guarantee that you will get rich easily. There are some things and steps that you must do first before you can achieve success in your life. However, in spite of spending many years in school, lots of people aren’t aware of this.

Get a Job

It is not a big secret. You have to start somewhere for you to have a cash flow.

Pay Off High Interest Debts

It means your credit cards. Settling debts with high interest like 17 percent is like making investments with 17 percent return. One of the mistakes that people make is paying only the required minimum amount for credit cards. It’s actually the trick of the banks to keep people pay forever. Just take a look at credit card bills and see how much you have been paying in interest. It is a bit shocking once you calculate how much it adds up.

Save at Least 10 Percent of Your Monthly Income

After you are done with your credit card debts, you may start saving. Some people do not save because they think that since they do not earn much, they will not have something to put aside. That is not always the case. In reality, if you earn more, you actually spend more. Therefore, as a remedy, you should make it a habit to pay yourself first. Then, put aside at least 10 percent of your income before paying anything.

Make a Nest Egg

Your savings must be geared towards making a safety net for yourself. Calculating your expenses monthly and making it your goal to save three to six times that amount can make a huge difference. Through this, if you can’t work for some reasons, you can still have money to spend without going into debts.

Invest

If you can create your nest egg, you should continue saving 10 percent of your income. You can put this money in diversified Index Funds portfolio rather than a savings account. Index Funds are basically investment products, which include a big amount of bonds and stocks that spread your money across the market. With this, if a company goes down, you will have some bonds to depend on. You will not need to worry about losing your money with wrong decisions.

Index Funds are preferred than savings account since ROI is higher. Savings account could provide you a return of as low as 1 percent while Index Funds may provide you a minimum of 5 percent or closer to 20 percent sometimes. Just pick a well-known company to take care of everything for you.

You can also consider opening your own business. However, you cannot be sure that your business will succeed. But, there is nothing you should worry about if you are always dedicated and put more effort in all of your actions.

Being rich is easy. You just have to combine it with dedication and time. Also, keep those things in mind.

October 19, 2018October 19, 2018

Top Five Lessons We Can Learn From Dave Ramsey

As far as biblical financial wisdom is concerned, no one beats Dave Ramsey when it comes to impact or reach. Ramsey has already helped thousands people all over the world find and enjoy financial freedom and peace. This is through his books, financial management university, and national radio broadcast.

Below are the top five lessons you can learn from Dave Ramsey:

Success is Not Measured by Material Things

In a modern world obsessed with money, brands and names, it is all too easy to think of stuff as a measurement of success. Having more material things means you have more money, right? But, Dave said that true success is all about the kind of legacy you leave behind. This legacy outlives you and continues to remain even after you leave the world.

The Bible is the Perfect Guide for the Right Financial Direction

The Bible remains to be the number one book filled with wisdom and thoughts that can help you with your day to day financial decisions. Possessions and money and mentioned in the Bible 2,350 times, paving way to financial success and good stewardship. While it is a must to work with financial advisors, the Scriptures will light your way to finding wisdom to wealth for you to leave a legacy that lasts for a long time.

Financial Communication is Vital for a Successful Marriage

You will be surprised to know that money concerns in marriages are not really all about money itself. Instead, these problems are conflicts about the household’s value systems. Finances urge couples to communicate and discuss their wants and desires. Once couples learn this truth, they will see financial discussions as a chance to make their marriage stronger bonded by intimacy and trust.

High Quality Relationships and Budgeting are the True Signs of Financial Success

It may sound a bit obvious but the best means to avoid debts is to refrain from overspending. Set a budget at the start of every month and follow it. You should be the one managing your money and not the other way around. Make sure you are also surrounded by people who will guide you towards your financial success. If you dream of financial freedom both for your family and yourself, you need to walk away from relational environments that only lead you to financial compromises and debts.

Be Angry with Debt to Escape It for Good

You don’t simply wander out of debt. The best way to fight debt is through hard work, determination, and passionate intentionality. This means you should be angry about debt and focus your energies instead on how to eliminate every bit of it. The Debt Snowball method is probably the most effective way to get rid of debt. While paying the monthly minimum on each debt, you tackle the tiniest loan with vengeance until it is all gone. You can them move on the next ones after that. Every win you make, whether they seem small, can uplift your spirits and lead you to financial freedom.

October 19, 2018

How Much Should You Have in Your Savings Account

You cannot really start a successful investing program until you have great foundation under your own financial feet. For small investors, this typically means putting money away in savings account as accessible safety nets in case of an emergency.

But, the question is, how much should you save? Well, it depends on some factors and these include the stability of your primary source of income or your employment situation, your preferred standard of living, and level of the fixed expenses you incur monthly. The probability of large also demands on the resources, especially the ones that could arise on short notice. Another factor is the amount of money you require to feel secure. This is basically an emotional consideration, which differs from one person to another.

It is important take those factors in your life seriously if you like to determine the amount of savings that makes sense for you. You may also start with these following steps:

Calculate Your Expenses

When trying to know how much cash you must keep in your savings account, you must look at your own fixed expenses. If you lost all your cash overnight, how can you keep your standard of living? Most experts recommend having at least 6 months emergency reserve in your own savings account and some urge you to take for consideration of at least 1-2 years. It is more ambitious, yet you do not need to build your own reserve overnight. You work at that through setting goals and accumulating your surplus slowly. A good way you can get there is through reducing cash demands on the finances of your family.

Know Your Standard of Living

You can determine your preferred standard of living through taking account of both the comforts and necessities or luxuries in life. A lot of necessities include groceries, rent, and so on would be on your list of your fixed expenses. Luxuries or comforts are the expenses like streaming or cable services, concerts, movies, sports games, going out to eat, jewelry, and vacations. These could be anything you do not need to live. Consider making a list of such things in 2 categories and narrow down your comfort category if possible. Consider every item on your list and ask yourself if you feel that you should have it to be much happier or if you do without this, at least for a certain period of time.

Consider Asking Yourself What You Require to Feel Secure

The amount to feel secure varies for everybody. It could even change based on your life’s phase. You have probably a figure that comes to your mind immediately even if it’s irrational. For several people, it is $10,000. For some, it could be more than that. For instance, billionaires want to keep their minimum savings of about $20B. So, be honest about yourself and consider some important things in your life. Once you hit your own goal, you may start putting cash to your investments with high returns.

July 22, 2018

Why The Rich Get Richer and The Poor Get Poorer

Do you really believe that rich get richer and the poor will get poorer? Well, in a recent survey, it shows that this saying is true for most people, particularly in the US households.

The recent survey conducted shows an increase in the historically high gap income and wealth between poor households and rich ones. Based on a speech given by Governor Lael Brainard of Federal Reserve, it showed that top one percent of households held a twenty-four percent share of every US household income as of year 2015 and a thirty-nine percent share of all US households wealthy. That is a 7 and 9 percentage point increase from values twenty seven years prior.

The rich may actually get richer, yet it does not necessarily mean that the poor will be poorer. The survey found that families with varied income saw a boost in average real incomes between year 2013 and year 2016. That is a contrast from the past three-year period when recession caused stagnant or low average incomes for every income group except one, which is the top of the income distribution. It only means that the financial gaps widen for the reason that while the finances of poor people improve slightly, the wealthy individuals are also making huge financial gains.

Federal Reserve is basically concerned regarding income and wealth gaps. Provided that 2/3 of the economy is actually consumer driven, it is essential that low income households have more discretionary cash to spend.

You could think that high income households would spend more cash since they could afford to do so. The wealthiest people are likely to save bigger portion of any extra incomer they earn relative to the households in low income groups. Aside from that, high income households are more likely to invest in extra funds into the equities and some vehicles that build wealth faster, widening wealth gap further.

Low income families don’t have that luxury. They spend since they should and they cannot afford investing in high return ventures like stocks since they might have to access to their funds anytime to handle unexpected expenses. Low income families will be likely to use the traditional bank accounts with the negligible interest rates.

What could close the wealth and income gap? Generally, recessions do a good job of leveling playing fields, yet a healthier way to close income gap is through the targeted policy. More works at higher wage would bring low income classes up at higher rate, particularly if the jobs as well as stimulus programs are targeted toward the minorities.

No matter what your wealth status is, you could make most of what you currently have through wise financial decisions. Budgeting basically applies whether your household income is a thousand dollar or a million dollar. Keep your spending under control and invest wisely. If you are struggling to make the ends meet, concentrate on your situation. Let the top one percent drive the economy with their spending for the meantime. They could afford extra spending within their budget.

July 22, 2018

Top 10 Tax Deductions for Small Business

IRS offers every business owner a number of tax deductions for small business if you are knowledgeable on where to look for them. Below are the tax deductions that small business owners should know:

Education Deductions

IRS has strict guidelines when deducting educational expenses, so make sure to read the Publication 970 thoroughly. The employers may deduct employee educational expenses once the courses improve or maintain job-related skills or if the employees require education to continue with their current work.

Deductions on Start-Up Cost

You may deduct up to $5,000 in your startup. The expenses that aren’t deducted may be amortized over a 6-month period that starts once you open your business. You may amortize or write off advertising, market research, business-related travel, employee training, advertising, legal advising, and some costs.

Vehicle Deductions

Car deductions are delineated clearly under the rules of IRS and tend to be among more scrutinized items, so record-keeping is important.

Entertainment Deductions

IRS does not mind your mixing business with pleasure. You may deduct up to fifty percent of the entertainment expenses for the unreimbursed business meetings. Entertainment should be in a business setting or must follow or precede a business meeting.

Equipment Deductions

A small business may take a deduction of up to $108,000 for the equipment bought in year 2006. This deduction basically falls under the Section 179 of tax code and reduced if purchases of equipment exceeded $430,000.

Software Deductions

Normally, software should be written off over 3 years for the reason that it’ll serve your business more than a year. However, Section 179 enables small businesses to deduct software that’s off-the-shelf the year it’s purchased.

Travel Deductions

The unreimbursed travel expenses are actually tax-deductible. IRS recommends keeping a log of receipts and expenses. Lodging, transportation, and even dry cleaning may be deducted and half of business meals. You may also deduct the expenses for the business associates who are traveling with you.

Professional and Legal Fee Deductions

Attorney and accountant fees are deductible as business expenses, yet you can’t deduct the professional fees for buying business assets like equipment. Such charges are included as the cost of the purchase. The sole proprietors may write off some fees from the tax professionals on Schedule C-EZ or Schedule C. For the sole proprietors, additional expenses may be deducted on f your 1040 in Schedule A.

Advertising Deductions

Promotions and advertising related to your business directly are deductible as miscellaneous expenses.

Charitable Deductions

Limited liability companies, S corporations, and partnerships all require that every member files the taxes of the company on their personal forms like charitable donations. The donations are actually passed through members like the income of the organization. C corporations are also entitled to the corporate deductions.

If your small business makes non-cash donation like giving a computer or a car, determine how much you could deduct. The deduction would reduce if you have received tax break for donated properties or if it lost a significant value.

July 22, 2018July 22, 2018

How to Qualify for a No Money Down Auto Lease

If you are planning to get a car lease, chances are you are a bit disappointed with the requirement of putting cash up front during the lease signing to begin the deal. After all, it is very rare to do this kind of thing when you are leasing a house, an apartment, or majority of other items. Why do you have to do this with a car, then? The good news is that there is really no need for you to do it since there are a lot of no money down auto lease deals that are available right now. However, since these are not that easy to find, this article will try to explain how it is possible to manage to lease a car with no down during the lease signing.

It Starts with Good Credit

One of the best ways of getting a no money down lease or get a lease with lesser money down compared to an average car shopper, is to ensure that your credit is exceptionally good. Drivers who have good credit are seen to be less of a risk in general. It means that they are qualified for better deals in the automotive leasing and financing world. When your credit is not that good to make you qualified for a no money down lease, you can ask a friend to consign the loan. Just remember that when you do this, you will put the credit of your friend at risk if you default on payments.

Proceed with Good Negotiating

A great means of getting a no money down auto lease is negotiating hard and insisting that you will not lease a car without it. There are instances when it doesn’t happen even if you have great negotiating skills. However, most of the time, lending companies and dealerships could be convinced to roll the down payment of the lease to the monthly payments of the car. On the other hand, when there is a low demand for the car, such as when it is the model year’s end or supplies are high, a lending company or dealer may waive the down payment as a whole in order to close another deal and remove the car from the showroom.

Consider Good Incentive

Taking advantage of the special offer or monthly manufacturer incentive on a car is another great option for getting a no money down auto lease. While it may be difficult to know the exact time when your preferred car will have a good lease incentive, most carmakers provide no money down lease deals every month for moving inventory or clearing out a certain vehicle prior to the end of a model year. if you are dead set on a no money down auto lease and the two strategies above don’t work, there might be a need to change your preferred car and stick with a different model offered with an incentive or no money down lease.

It is definitely possible to be qualified for a no money down auto lease but it is not likely all the time even if you have strong negotiating skills or good credit. But, by following the suggestions above, you can look forward to debunking this auto industry myth.

June 24, 2018

Five Tips for Finding Venture Funding

Many people ask on the ways to find venture funding. Well, if you are wondering on how your startup can acquire venture capital, it almost definitely can’t. Venture capital is a rarified atmosphere of emerging businesses and high-end startups with experienced management teams, secret sauce, high potential growth, and much more.

People who don’t have track records do not get venture capital. Businesses that do not look like they can grow fast and be enormously big size do not get venture capital. Even service businesses do not get venture capital. Therefore, before you start looking for venture funding, you should understand first the difference between an angel investment and venture capital.

You have to take note that venture capital demands almost the same as angel investors do. Majority of venture capital likes to invest bigger amounts in late-stage startups.

Below are some of the tips for finding venture funding:

1. Never Do Anything in Bulk

Get rid of the email templates like plague. Never think that serious investors would read summary memos or watch the pitch, less read business plans, when it looks like it is being sent by bulk to different investor. This concept basically dates back in 1980s when some people imagined that the venture capital companies were looking at the business plans coming unsolicited. They were not, yet sometimes, they pretend they were.

2. Do Your Homework

Determine some venture capital firms that invest the amount you require in your industry, region, and at your development stage. Venture capital companies each have their own unique identities, interests, and personalities. They also have preferences regarding where they invest, what amounts, and at what stage. Majority of them have sites and most sites announce their preferences. They do not like to deal with those who are not in their category and do not know it. The reason behind it is that they actually expect you to know.

3. Have an Instant Summary and Good Tag Line

Begin with an elevator pitch and get every key point down, yet the theoretical sixty seconds of classic elevator pitch is a bit too much. You have to describe your business in 1 sentence or 2 and that sentence should be intriguing. People had success with some known business of new business area.

4. If Your Summary Memory or Summary Video Works, Consider Pitching

The pitch is basically the slide deck, yes, however that isn’t what matters. It is the venture capital companies chance to meet you and see your team as well as the story of your business. There are various things about pitches. But, never think that failure or success depends on the pitch because it does not. It depends on the credibility, story, and assessment of the venture capital companies for your future prospects.

5. Ready Your Business Plan

It will serve as your screenplay while your pitch will be the movie. Never do the plan too formal or too big because it isn’t going to last and must not be older than 2-4 weeks.

Conclusion

Never consider spending investment money before the check clears the bank. The deals fall through always. Aside from that, select an investor wisely.

June 24, 2018

How to Calculate Your Net Worth

There are many net worth software and calculators that will help you calculate your net worth. However, for you to get the most out of these, you must be able to calculate your own net worth by yourself. It only requires understanding about net worth.

Net Worth – What is It?

Generally, your net worth is your assets or everything you own minus your liabilities or what you owe. Assets may include investments and cash, your house, and some real estate properties, vehicles or anything of value you have. Liabilities, on the other hand, are what you own on such assets such as student loan debts, mortgage, and car loans.

Net worth is basically your financial health’s measure since it actually says what you’d have left over once you sold your assets to pay your debts. Each financial move you create must be aimed at boosting your net worth. It means either decreasing liabilities or increasing assets.

Steps to Calculate Your Net Worth

It is an easy and simple process to calculate your net worth, yet it requires that you gather all information that surrounds your current liabilities and assets. Majority of financial planners recommend that all of their clients keep a secured folder with information on all liabilities and financial assets to be updated every year. Organizing and gathering this information can bit a chore at first, yet ensures that you have an access to the information once required.

Even if such a folder may be turned into more, calculating net worth only needs basic financial information about the things you own as well as the debts you owe. Below are the ways to get started:

Calculating Assets

Begin by listing your biggest assets. For many people, it might include the value of their home, vehicles or any real estate properties. In case of business owners, this list will also include the business value that has its own complicated calculation. Ensure that you use accurate market value estimates in current dollars.
Gather the latest statements for more liquid assets. Such assets include savings and checking accounts, cash, some investments or CDs.
Consider listing some of your personal items that can be of value. Such might include coin collections, valuable jewelry, musical instrument, and so on. You do not have to itemize everything, yet you may try listing items that are worth $500 and more.
Add all of the assets together and get the total assets.

Calculating Liabilities

Begin with your major outstanding liabilities including the balance on your car loans or mortgage. List such loans and current balances.
List all your personal liabilities like student loans, balance on credit cards, and so on.
Add everything and get the total liabilities.

Calculating Net Worth

For you calculate your net worth, subtract total liabilities from total assets. It does not matter how small or big the number is. It does not matter if the number is negative because your net worth is the starting point to have something you can compare against in the long run.

Always be conservative with the estimates, particularly with vehicle and home values. Inflating value of big assets may look great on paper, yet might not provide your precise net worth.