Disclaimer: Information contained below was accurate as of the date of publication. Due to frequent tax law changes, information may no longer be accurate. For the latest tax information, please contact a member CPA.

IS YOUR I.D.A.P. LIST UP-TO-DATE?

by Andrew D. Schwartz, CPA

Do you maintain a list of your important documents, accounts, and policies (I.D.A.P.)?  If so, do you update that list from time to time?  Do other people know where to find your list, and then, could they make sense of the information listed?

Maintaining an updated inventory of your important documents, accounts, and policies is a smart thing to do.  When compiling your list, make sure to include a description of the following items, including account numbers and where each item is located:

• Bank accounts
• Investment accounts
• Retirement accounts
• Credit and debit cards
• Real estate deeds and mortgages
• Auto loans, leases and insurance policies
• Other loans and debts
• Life and disability insurance policies
• Homeowner's/renter's insurance policies
• Wills
• Other important legal documents including health care proxies and durable powers of attorney
• Tax records
• Jewelry and other valuables

When going through your accounts, take the time to double-check who is the named beneficiaries on each of your insurance policies and retirement accounts.

It's also a good idea to inventory what's in your wallet.  All you need to do is make a photocopy of the front and back of each item you carry around with you.  When copying what's in your wallet, why not cancel those credit cards you never use any more?

Do you have a safe deposit box?  Since that's where you hold many of your important documents, maintaining an updated inventory of what's in your box should not be overlooked. 

Upon completing or updating your inventory, make at least three copies of your I.D.A.P. list.  Keep one in your files at your home or office.  Give a second copy to a family member, close friend, or to your CPA or attorney.  And if you have a safe deposit box, that's the perfect place for a third copy to be stored.

While putting together and updating your inventory takes time, imagine the time that will be wasted if you (or someone else) need to find all your important documents, accounts, and policies without the help of an updated list to go by.

We've prepared an Excel Template (idap_list.xls) that you can download to help you keep track of your important documents, accounts, and policies.

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THE HUMMER DEDUCTION

by Andrew D. Schwartz, CPA

If you're planning to purchase a vehicle that you'll use in connection with your trade or business, the 2003 Tax Act will save you some money.  That's because the recent tax-cut package increased the allowable first year depreciation for automobiles by $3,050 to $10,710.

And if you're looking to buy one of those huge SUVs, the potential tax savings to you is huge.  Believe it or not, you can now write-off 100% of the cost of certain SUVs - up to $100,000.

Generally, when you purchase a business auto, the depreciation you're allowed to claim the first year is limited.  Certain SUVs, however, are exempt from the luxury auto limitations. To qualify for the Hummer deduction, the vehicle must have a loaded gross vehicle weight in excess of 6,000 pounds.  Plus, more than half of the miles driven must be for business purposes.

Here's where you can really benefit from the Hummer deduction.  Through December 31, 2005, you can write off the first $100,000 of business property and equipment you purchase each year - including SUVs with a loaded gross vehicle weight in excess of 6,000 pounds.

Let's say you purchase an eligible SUV with a cost of $50,000, which you use 80% for your business.  If that's the case, you'll be entitled to claim a $40,000 deduction on your tax return.

What's the catch?  If the stop using your SUV more than 50% for business within five years, you need to "recapture" the excess depreciation that you claimed.  Basically, the IRS would require you to repay some of the taxes you saved by claiming such a large deduction the year you bought your SUV.

While the Hummer deduction can be substantial, it shouldn't be the only factor to consider when purchasing your next vehicle.  As my tax professor told the class many times during my Intro to Tax class, "When it comes to saving taxes, don't let the tail wag the dog." 

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