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IRS Raises Standard Mileage Rate Effective July 1, 2011
In response to rising gasoline prices, the IRS has raised the standard mileage rate for business use of an atomobile from 51 cents per mile to 55½ per mile, effective July 1 (Announcement 2011-40). The medical and moving standard mileage rate has increased to 231/2 per mile, also on July 1.
The new optional standard mileage rates will apply until superseded by future guidance and can be used by taxpayers to calculate the deductible costs of operating an automobile. Alternatively, taxpayers can use their actual costs, but must maintain adequate records and be able to substantiate their expenses.
The standard mileage rate for services to charitable organizations is set by statute at 14 cents per mile and remains unchanged.
The former rates announced in Notice 2010-88 (51 cents per mile for business use, 19 cents per mile for medical and moving expenses) continue to apply to expenses incurred before July 1, 2011.
Look Into the Benefits of a Solo 401(k)
Have you heard about solo 401(k) plans? The traditional type of 401(k) retirement plan is now available for self-employed individuals. And it lets you save more than other types of plans.
In the past, 401(k) plans were typically offered by larger corporations. Employees could make pre-tax contributions by payroll deduction. The company would then usually match a percentage of those contributions. Investments grew tax-free until withdrawn at retirement. One advantage of a 401(k) plan is the relatively large amount you can contribute each year - $16,500 in 2011 with an extra $5,500 catch-up if you're 50 years old or older.
Now you can establish the same type of plan if you're self-employed or run an "owner only" business. That's a business with just you and possibly your spouse, but no employees. You can save more with a solo 401(k) than with the traditional SEP, SIMPLE, or Keogh plans. That's because you are able to make two types of tax-deductible contributions. First you make the usual employer contribution as owner of the business. Then you can make an additional salary deferral as an employee. As a result, you could potentially shelter up to $49,000 of your 2011 self-employment earnings from tax. If you're eligible for the over-50 catch-up, that rises to $54,500.
The solo 401(k) plans are flexible and relatively simple to administer. If you think this plan might be right for you, please contact our office. We can tell you more about it and help show you how much you could save.
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