http://www.kahnlitwin.com/blogs/tax-blog/ en jlandry@kahnlitwin.com Copyright 2013 2013-05-07T20:44:59+00:00 http://www.kahnlitwin.com/blogs/tax-blog/how-much-can-you-save-with-rd-tax-credits http://www.kahnlitwin.com/blogs/tax-blog/how-much-can-you-save-with-rd-tax-credits#When:20:44:59Z The R&D Tax Credits can be used by many different companies in a wide range of sizes and industries. Many of our clients have obtained substantial cash benefits from this tax credit program. For over a decade, KLR has helped our clients take advantage of hundreds of thousands in tax credits each year. The chart below represents actual tax savings that KLR has helped our clients achieve:Type of Firm RevenueFederal & State Tax Credits Communication Equipment Manufacturer $9,800,000 $54,900 Medical Device Manufacturer $11,300,000 $114,600 Infant Product Designers $46,800,000 $176,500 Wood Composite Manufacturer $60,300,000 $194,700   Coated Fabrics Manufacturer $80,600,000 $657,800 Our goal is to help you recoup and reduce tax dollars paid to the IRS by identifying “Qualified Research Expenditures,” which include: Employee wages Supply costs Sub Contractor costs Complementary Analysis KLR’s R&D Credit team can help your company identify qualified research activity, quantify associated costs, properly document research expenses and calculate the credit.  Even in situations where companies have already been claiming some R&D credits on past income tax returns, KLR has very often been successful in generating additional credits by performing a more detailed analysis of a company’s qualifying activities. Receive a complementary analysis of your company’s R&D Tax Credit qualifications today. 2013-05-07T20:44:59+00:00 http://www.kahnlitwin.com/blogs/tax-blog/reduce-your-tax-liability-improve-cash-flow-rd-tax-credits http://www.kahnlitwin.com/blogs/tax-blog/reduce-your-tax-liability-improve-cash-flow-rd-tax-credits#When:15:30:40Z Complementary Analysis If your company has spent time and resources developing new or improved products and processes, you may qualify for the research and development (R&D) tax credit. In a period where many business owners are experiencing rising income tax rates for 2013 and beyond, the time has never been more urgent to extract any federal, and possibly state, tax benefits from these activities. The R&D Tax Credit is designed for both formal R&D work done in laboratories as well as for experimental development work that can occur on the shop floor and even be earned during the technical struggles leading up to shipment of a new or improved product. Additionally, costs incurred to improve the process by which a company produces its product can qualify. Tax Benefit R&D Tax Credits are an actual dollar for dollar reduction of a taxpayer’s federal income taxes. In many cases an R&D Tax Credit can reduce state taxes depending on the states particular laws. The R&D Tax Credit allows qualifying businesses to recoup a portion of their expenses related to business improvement and product development.  Companies can also claim credits from prior years and request a refund of taxes paid. What Activities Qualify? Developing new improved or more reliable products,  processes or formulas Developing patents Conducting testing and developing prototypes, models, or samples Performance testing Developing new technology Experimenting with the use of new materials and compounds Upgrading systems or software Many others Who Qualifies? Engineering Manufacturing Machine Shops Food Sciences/Manufacturers Software Developers Tool and Die Pharmaceutical Chemical Fabrication Other Qualified Businesses Complementary Analysis KLR’s R&D Credit team can help your company identify qualified research activity, quantify associated costs, properly document research expenses and calculate the credit.  Even in situations where companies have already been claiming some R&D credit on past income tax returns, KLR has very often been successful in generating additional credits by performing a more detailed analysis of a company’s qualifying activities.  Receive a complementary analysis of your company’s R&D Tax Credit qualifications today.   2013-04-24T15:30:40+00:00 http://www.kahnlitwin.com/blogs/tax-blog/how-long-will-ic-disc-tax-benefits-last http://www.kahnlitwin.com/blogs/tax-blog/how-long-will-ic-disc-tax-benefits-last#When:13:15:45Z I recently wrote about the benefits of implementing an IC-DISC strategy for US manufacturers who are exporting.  After reviewing the strategy with various companies who are not familiar with IC-DISCs, one of the initial reactions was, “How long will this last? Will it survive calls for proposed tax reform circulating in Washington?” To put this in context, some variation of the DISC rules, which is a tax incentive aimed at exporters baked into the tax code, has been on the books since the mid-1970s. While I don’t profess to have a crystal ball that is any better than the next guy’s, given the Obama administration’s current emphasis on increasing exports, I think these rules will continue to be around for a while. In March 2010, President Obama created an advisory council of industry executives and established a goal of doubling US exports to about $3.14 trillion by the end of 2014 from $1.57 trillion in 2009. The aim of this policy is to increase America’s role as a manufacturing center and support about 2 million additional jobs. On March 12th Bloomberg.com published an article titled “Obama Says U.S. Well on Way to Goal of Doubling Exports by 2014”, reporting that the President intends to achieve this goal in large measure by pressing ahead with new trade agreements with Asia and Europe and gaining congressional approval on accords with South Korea, Columbia, and Panama (which were actually negotiated during the Bush administration). The export council reported that the US was just under 50% toward reaching their 2014 goal, with gains last year coming from agriculture, manufacturing, and high-technology. As the President noted in the Bloomberg article, the gains are not limited to large corporations. Small businesses are benefiting as well. Later this year, the President will be meeting with leaders of Asian nations to push for a broad agreement on trade. In addition, the US and European Union are in trade talks to expand our economic relationship. Those talks are targeted to be complete within two years. These efforts, although welcome, solely on their own will not help the US to meet its export goals by 2014. Trade pacts take a long time to negotiate and get approved by Congress. There are also plenty of other headwinds facing exporters in our still weak economy. Nevertheless, this focus on the country’s export trade and manufacturing base can only bode well in the long term and lead me to believe that tax incentives for exporters will be around for a while longer. For more information on how your company might benefit from an IC-DISC, contact Paul Oliveira, CPA or complete the form below and one of our International Tax Advisors will contact you. Read Paul’s previous blog titled “Reduce Federal Income Taxes on Export Profits with IC-DISC”. KLR is a premier provider of international tax services to middle market companies and works with both foreign-based companies moving to the U.S. market as well as domestic companies that do business around the world. The KLR International Tax group is available to assist clients with any tax issues pertaining to either inbound or outbound tax issues, both from a corporate perspective as well as for multinational families. Those issues may include the IRS’ Voluntary Disclosure Program, planning for intellectual property transfers, transfer pricing, export incentives, and global restructuring projects. 2013-03-14T13:15:45+00:00 http://www.kahnlitwin.com/blogs/tax-blog/education-tax-credits http://www.kahnlitwin.com/blogs/tax-blog/education-tax-credits#When:15:43:25Z If you or a dependent is a student you may be able to significantly reduce your tax liabilities by applying for education tax credits. Education tax credits can be claimed in the form of two higher education credits, the American Opportunity Tax Credit and the Lifetime Learning Credit. To report these credits, taxpayers should use Form 8863. Q: Who is qualified to claim an Education Credit on their return this year? You may be able to claim an education credit if you, your spouse, or a dependent claimed on your tax return was a student enrolled at or attending an eligible educational institution. The credits are based on the amount of adjusted qualified education expenses paid for or by the student in 2012 for academic periods beginning in 2012 or beginning in the first three months of 2013. Q: What is an academic period? An academic period is defined by the IRS as any quarter, semester, trimester, or any other period of study as reasonably determined by an eligible education institution. Q: What is the American Opportunity Tax Credit (Formerly the Hope Credit) The American Opportunity tax credit is a credit of up to $2,500 (an increase from $1,800) for qualified education expenses and up to 40% is refundable. This credit can be claimed for any of the first four years of college. Unfortunately, post graduate work does not apply, but the Lifetime Learning Tax Credit can be used for that. The student must meet the required qualifications and certain income restrictions apply (see the chart below). This credit can be used for: Tuition & fees Course materials Computers Q: What is the Lifetime Learning Tax Credit This credit equals 20% of qualified education expenses, up to a maximum of $10,000 of qualified expenses (maximum credit is $2,000 per year) for qualified tuition and related expenses. The student must meet the required qualifications and certain income restrictions also apply (see the chart below). This credit can be used for tuition and fees for attendance at any: College University Vocation School Postsecondary Education Institution Comparison of Education Credits Caution.  You can claim both the American opportunity credit and the lifetime learning credit on the same return-but not for the same student.   American Opportunity Credit Lifetime Learning    Credit Maximum creditUp to $2,500 credit per eligible studentUp to $2,000 credit per returnLimit on modified adjusted gross   income (MAGI)$180,000 if married filing jointly;$90,000 if single, head of household, or qualifying   widow(er)$124,000 if married filing jointly;$62,000 if single, head of household, or qualifying   widow(er)Refundable or nonrefundable40%  of credit may be refundable; the rest is nonrefundableNonrefundable—credit limited to the amount    of tax you must   pay on your taxable incomeNumber  of years of postsecondary educationAvailable ONLY if the student had not completed the first 4 years of postsecondary education   before 2012.Available for all years  of   postsecondary education and for courses to acquire or improve job skillsNumber  of tax years credit  availableAvailable ONLY for 4 tax years  per eligible student (including any   year(s) Hope credit was claimed)Available for an unlimited number of yearsType of program requiredStudent must be pursuing a program leading  to a degree or   other recognized education credentialStudent does   not need to be pursuing a program leading to a degree or other   recognized education credentialNumber  of   coursesStudent must be enrolled  at least   half time for at least one academic period beginning during the yearAvailable for one or more coursesFelony drug convictionAs of the end of 2012, the student had not been convicted of a felony for possessing or distributing a controlled  substanceFelony drug convictions do not make    the student   ineligibleQualified  expensesTuition, required  enrollment fees,  and course materials that the student needs for a course of study   whether  or not the materials are bought  at   the educational institution as a condition of enrollment or attendanceTuition and required  enrollment fees    (including amounts   required  to be paid   to the institution for course-related   books, supplies, and equipment)Payments for academic periodsPayments made in 2012 for academic periods   beginning in 2012 or beginning in the first 3 months of    2013 Education credits can significantly increase your tax savings, however additional restrictions may apply. For help determining if you or a dependent qualify for education tax credits please contact any member of the KLR Tax Services Team or call us at 888-857-8557. 2013-02-15T15:43:25+00:00 http://www.kahnlitwin.com/blogs/tax-blog/reduce-federal-income-taxes-on-export-profits-with-ic-disc http://www.kahnlitwin.com/blogs/tax-blog/reduce-federal-income-taxes-on-export-profits-with-ic-disc#When:21:27:20Z As you know, the recently enacted American Taxpayer Relief Act of 2012 permanently assigned a preferential tax rate to qualified dividends, albeit at a somewhat higher 23.8% in many cases. This permanent preferential tax rate for dividends makes IC-DISC an effective tax planning strategy for many companies who deliver their products for use outside of the US. Many privately-held companies that are manufacturing product here in the US and delivering it to customers outside of the US, including Canada and Mexico, can significantly reduce their federal income taxes related to those export profits. The IC-DISC is the last surviving federal income tax incentive for U.S. companies that export products to foreign countries. The IC-DISC is a separate legal entity and S-Corporations, individuals and partnerships are eligible to be shareholders. KLR can assist clients with assessment of the strategy, implementation, tax filings, ongoing maintenance, and IRS representation. The IC-DISC provides a permanent federal income tax reduction to the shareholders of the IC-DISC. This permanent tax savings is realized when the exporting company deducts the commission it pays to the IC-DISC from its ordinary income. This commission would typically be deductible at 39.6%. IC-DISC is a tax-exempt entity, and a 23.8% percent tax is paid on qualified dividends to the shareholders of the IC-DISC. Thus, a reduction in federal income taxes from 39.6% to 23.8% on qualified export sales is realized. IC-DISC Benefits: Permanent tax savings on qualified export sales. Increased liquidity for shareholders that is available throughout the year. Higher return on investment with no change to normal operations. Possible wealth shifting opportunities for estate planning purposes. The diagram below provides a useful illustration of how the process works (from the client’s perspective). IC-DISC Process: If you are a privately-held business who is generating at least $2 million in export sales, and whose overall operations are profitable enough to obtain the maximum benefits outlined above, IC-DISC could significantly reduce the federal income taxes related to those export profits. To qualify, it is essential that the products are substantially manufactured in the US. For more information please contact Paul Oliveira, CPA or any member of the KLR International Tax Services Team. KLR is a premier provider of international tax services to middle market companies and works with both foreign-based companies moving to the U.S. market as well as domestic companies that do business around the world. The KLR International Tax group is available to assist clients with any tax issues pertaining to either inbound or outbound tax issues, both from a corporate perspective as well as for multinational families. Those issues may include the IRS’ Voluntary Disclosure Program, planning for intellectual property transfers, transfer pricing, export incentives, and global restructuring projects. 2013-02-11T21:27:20+00:00 http://www.kahnlitwin.com/blogs/tax-blog/what-are-the-tax-consequences-of-foreclosure http://www.kahnlitwin.com/blogs/tax-blog/what-are-the-tax-consequences-of-foreclosure#When:15:00:27Z Most of the foreclosure consequences depend on the circumstances. The most important variable in determining the federal income tax consequences of a principal residence foreclosure is: What is the value of the property in comparison to the mortgage balance? Here are some possible scenarios that may apply. Property Worth Less than Loan Balance When the property’s fair market value (FMV) is less than the mortgage balance (which is the most common situation in foreclosure), the tax rules treat the foreclosure as a sale of the property for the FMV amount.  Yet- the foreclosure could trigger a tax gain if the FMV of the home exceeds the cost basis (basis usually equals the purchase price plus the cost of improvements). However, if the FMV is greater than the cost basis, that gain will often be free from federal income taxes thanks to the principal residence gain exclusion. Under the exclusion, unmarried homeowners can exclude (pay no tax on) gains of up to $250,000. Married joint-filing couples can exclude gains of up to $500,000. To qualify for the tax exclusion, you generally must have: Owned the home for at least two years during the five-year period ending on the foreclosure date; and Used the home as your principal residence for at least two years during that five-year period. If the cost basis of a principal residence exceeds FMV, the foreclosure transaction will trigger a nondeductible loss. If the lender then forgives part of or all of the deficiency (the difference between the mortgage debt and the foreclosure sales proceeds), the forgiven amount constitutes cancellation of debt (COD) income for tax purposes. Any COD income must be reported as income on your Form 1040 for the year the debt forgiveness occurs.  For a short time, there are temporary provisions in the tax code for principle residences and you may qualify for a tax-law exception on the debt cancellation income. Property Worth More Than Loan Balance When the property’s FMV exceeds the loan balance (a less-common situation), the foreclosure is treated for federal income tax purposes as a sale of the property for a price equal to the loan balance plus any additional proceeds received by the borrower as a result of the foreclosure sale.  The cost basis is the same as outlined above. Summary of Recourse Loans An important thing to understand about a mortgage foreclosure is that the lender can still come after a borrower for any deficiency/shortage that remains after the foreclosure sale.  The foreclosure doesn’t automatically cancel the debt.  It will often take many months or even several years for a lender to decide whether to pursue a borrower for the full deficiency, or to forgive part of it, or to forgive the whole thing. In summary, the important factors are that a principal residence mortgage foreclosure can result in a gain and maybe some COD income too. Thankfully, any gain will often be free from federal income taxes thanks to the principal residence gain exclusion (State tax results may vary).  Some or all of any COD income may also be tax free thanks to beneficial tax-law exceptions.  When no exception applies, COD income must be reported as income on a borrower’s tax return for the year the debt forgiveness occurs. As you can see, the tax consequences of a foreclosure are complex. Please contact Norman LeBlanc, CPA any member of our Tax Services Team if you have any questions about your situation. 2013-02-11T15:00:27+00:00 http://www.kahnlitwin.com/blogs/tax-blog/home-office-deductions-a-new-simplified-calculation http://www.kahnlitwin.com/blogs/tax-blog/home-office-deductions-a-new-simplified-calculation#When:20:55:44Z The IRS recently provided taxpayers with a new simplified alternative for calculating their home office deductions. The election to use this new simplified calculation is available beginning with the 2013 tax year.  Detailed information on the simplified calculation can be found in Revenue Procedure 2013-13.  It is important to note that this Revenue Procedure did not alter the eligibility requirements for claiming the home office deduction. Under the new simplified calculation: A taxpayer’s home office deduction is calculated by multiplying the square footage of the home office by a rate of $5 per square foot.  The maximum allowable square footage per office is limited to 300 square feet or a maximum deduction of $1,500 (300 x $5) for each home office. There is no need to identify, calculate or substantiate the actual expenses attributable to the home office. Taxpayers have the ability to make the election on an annual basis and may alternate between the older established methodology and the new simplified calculation on a year by year basis. Mortgage interest and real estate taxes are fully deductible as personal itemized deductions on Schedule A. There is no requirement to prorate these deductions between the home office and personal residence.  While there is no loss of deductions, taxpayers claiming the home office deduction as sole proprietors may find that their adjusted gross income is higher using the new simplified calculation because no portion of the real estate taxes and mortgage interest are deducted on Schedule C. This may have a negative effect on self employment tax liability and deduction phase out calculations. In addition, a larger portion of real estate taxes will be subject to possible disallowance under the alternative minimum tax (AMT). Depreciation of the home office is not allowable. A taxpayer using the new simplified calculation may be able to decrease the amount of gain and depreciation recapture attributable to the home office that might have otherwise been recognized on the later sale of the residence under the older established methodology. The home office deduction, computed using the new simplified calculation, is still subject to the business income limitation.  Any unused home office deduction is disallowed as a carry forward to future years. If the taxpayer elects the new simplified option, the taxpayer is not eligible to use any carry-forward home office deductions from prior years in the year the election is made.  Taxpayers may use these carry-forward deductions in a subsequent year if the older established methodology is again used. Employees who receive an employer reimbursement or an expense allowance for home office expenses are not eligible to use the new simplified calculation. The new simplified calculation will save Taxpayers time and effort in computing their home office deductions.  However, in many cases, the new simplified calculation will produce a lower home office deduction than under the old methodology.  For help with your home office deduction or if you would like to discuss the pros and cons of each calculation method, please contact Mark Schofer, CPA or any member of our Tax Services Team.    2013-01-22T20:55:44+00:00 http://www.kahnlitwin.com/blogs/tax-blog/chinese-wholly-foreign-owned-enterprises-wfoes-vs.-indian-private-limited-c http://www.kahnlitwin.com/blogs/tax-blog/chinese-wholly-foreign-owned-enterprises-wfoes-vs.-indian-private-limited-c#When:13:31:50Z Re-posted from Dezan Shira As the largest world economies show a minor slowdown, they are still an attractive place for investment in trade and/or manufacturing.  Understanding what entity to establish in either China or India becomes an essential part of the initial discussion.  Below is a whitepaper discussion on the comparison of Chinese WOFE versus a Indian PLC’s. Companies looking to invest in trade or manufacturing in China usually prefer to establish wholly foreign-owned enterprises (WFOEs). There are so many factors that make WFOEs popular in China, such as their broad business scope, 100% foreign ownership and control, the additional security guaranteed to technology and intellectual property rights, a self-developed internal structure, the capacity for insertion of existing company culture, the ability to sell to China’s domestic market, and the ability to repatriate profits. India’s private limited companies (PLCs) have a similar structure although a number of factors distinguish them from the Chinese WFOE. China, for example, classes Sino-foreign joint ventures (JVs) as a separate form of legal entity, whereas both 100 percent foreign-owned Indian PLCs and Indo-foreign JVs are governed by the same regulations. For the purposes of this analysis, we will concentrate on the 100% foreign-owned Indian PLC. The need for such a company to have either 100% foreign ownership or an additional Indian investor depends, similarly to China, upon the scope of the business—the company’s intended activities. India needs to be studied first to assess the suitability of using a 100% foreign-owned model. For example, until earlier this year foreign companies investing in the single-brand retail sector were required to enter the market as part of an Indo-foreign JV in which Indian parties held at least 49 % of the company’s control. A PLC set-up in India follows a specific path that differs substantially from a WFOE set-up in China. Foreign Investment in India is regulated under the Foreign Exchange Management Act and is allowed under two different routes: the automatic and the approval routes. The standard set-up process, which is a comparatively easy establishment process, is known as the “automatic route”. Under this route, 100% investment is allowed in certain sectors, as per the notification issued by the Reserve Bank of India, which governs which industries may engage in FDI. For these sectors, no specific approval is required prior to setting up an entity, and the establishment process is consequently quite simple. For other sectors, which fall under the approval route, sectoral caps are defined and investment requires government approval. In this case there is a separate set of procedures to be followed: amongst other things, the company must obtain approval for investment from the Foreign Investment Promotion Board of the Ministry of Finance. For example, sector specific guidelines in the media and entertainment industries have been issued by the Reserve Bank; for certain activities, government permission is required prior to investing. Most business/commercial sectors now fall under the Automatic Route and very few cases require prior Foreign Investment Promotion Board approval. Similar to China’s WFOE, establishment of an Indian PLC requires the fulfillment of certain key positions. Whereas WFOE set-up requires an executive director or board of directors, at least one supervisor and a general manager, the Indian PLC must have a minimum of two directors, and between two and fifty shareholders. Both directors and shareholders can be other legal entities. As in the case of China, the amount of paid-up capital required should be a financial exercise to determine the business’ start up and cash flow needs. If we compare the two entities, the Indian PLC appears to be more efficient, especially in terms of tax, than China’s WFOE. As the table below shows, India does not charge a tax on profit repatriation whereas China levies a 10% tax on the value of repatriated funds. Additionally, China’s labor welfare cost is higher. However, it is also important to note that domestic companies in India are liable to pay dividend distribution tax, levied at 15% of dividend payout, which is deducted from their reserve or surplus.RequirementChinaIndiaLimited liabilityYesYesMinimum capital investmentIndustry Specific$2500Regulatory status1 Tier2 TierIncome tax25%33%VAT7%12.5%Profit repatriation tax10%0 If you have questions about doing business in China and would like to discuss further, please contact Neelu Mehrotra, Principal or any member of the International Tax Services Group. Download our latest whitepaper now- International Tax: China Overview KLR is a premier provider of international tax services to middle market companies and works with both foreign-based companies moving to the U.S. market as well as domestic companies that do business around the world. The KLR International Tax group is available to assist clients with any tax issues pertaining to either inbound or outbound tax issues, both from a corporate perspective as well as for multinational families. Those issues may include the IRS’ Voluntary Disclosure Program, planning for intellectual property transfers, transfer pricing, export incentives, and global restructuring projects. Sources: Leading Edge Alliance – KLR is an active member of the Leading Edge Alliance, an international professional association of over a hundred independently-owned accounting and consulting firms. The Leading Edge Alliance enables KLR to access the resources of multibillion dollar global professional services organization, providing additional industry expertise, professional training and education, and peer-to-peer networking opportunities nationally and globally, around the corner and around the world. Dezan Shira & Associates, Inc. is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States. To learn more about the firm, please visit their website at www.dezshira.com 2013-01-22T13:31:50+00:00 http://www.kahnlitwin.com/blogs/tax-blog/how-much-can-i-contribute-to-an-ira-in-2013 http://www.kahnlitwin.com/blogs/tax-blog/how-much-can-i-contribute-to-an-ira-in-2013#When:21:04:42Z In 2013 you are allowed to contribute up to $5,500 to your traditional Roth IRA account. For taxpayers age 50 or older, the amount rises to $6,500. This is an increase from the limits in 2012 that were $5,000 and $6,000 respectively. Apart from these limits, an individual is prohibited from contributing more than his or her earned income for the year. For example, if your teenage daughter has a part-time job from which she earned $5,200 for the entire year, she may contribute no more than $5,200 to her personal IRA. If you have questions about contributions to your IRA please contact Peri Ann Aptaker, Director of Wealth Management or call 888-KLR-8557 2013-01-21T21:04:42+00:00 http://www.kahnlitwin.com/blogs/tax-blog/2013-standard-mileage-rates-announced-by-irs http://www.kahnlitwin.com/blogs/tax-blog/2013-standard-mileage-rates-announced-by-irs#When:21:11:02Z The Internal Revenue Service has issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charity, and medical or moving purposes. Beginning on January 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) are as follows: 56.5 cents per mile for business miles driven. 24 cents per mile driven for medical or moving purposes. 14 cents per mile driven in service of charitable organizations. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs only. The standard mileage rate is determined using various factors such as the state of the economy, gas prices, and the estimated cost of normal wear and tear on a vehicle; thus it is intended to reimburse over and above the amounts for which someone pays strictly for gas. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Read our blog “Should I use the actual expenses incurred or the standard mileage rate?” to learn which method is best for you. Any member of the KLR Tax Services Group can help you with calculating your business travel expenses or any of your tax planning needs. Contact us at TrustedAdvisors@kahnlitwin.com or call 888-KLR-8557.   2013-01-11T21:11:02+00:00