tax planning: Act Now! Get your safe-harbor expensing in place
- 09/08/23 12:15 PM
For 2024, you can elect the de minimis safe harbor to expense assets costing $2,500 or less ($5,000 with audited financial statements or similar). The term “safe harbor” means that the IRS will accept your expensing of the qualified assets if you properly abided by the safe harbor rules. Here are three benefits of this safe harbor: Safe harbor expensing is superior to Section 179 expensing and depreciation because you don’t have the recapture period that can complicate your taxes. Safe harbor expensing simplifies your tax and business records because you don’t have the assets cluttering your books. The safe harbor does not … (1 comments)
tax planning: Defining real estate investor and real estate dealer
- 09/08/23 11:35 AM
I have great news! You can have in your real estate portfolio both investor and dealer properties. This distinction is significant for tax purposes. Here’s a snapshot of the potential tax differences: Suppose you profit $90,000 from a property sale: As a dealer, your tax could be up to $46,017. As an investor, it might be only $21,420. That’s a potential savings of $24,597 in taxes for investors! You look at every property individually to determine its classification and make sure you identify each property in your records as either an investment or dealer property. Not doing so can lead to complications with the … (2 comments)
tax planning: Hobby loss rule raises its ugly head
- 09/08/23 11:30 AM
I am bringing to your attention some recent developments regarding the “hobby loss rule.” Given that you have diverse sources of income, some of which might be considered hobbies, I believe this information could be of great importance to you. What Is the Hobby Loss Rule? The hobby loss rule might apply to you if you have any activity that results in a tax loss. Under this rule, you might lose out on your deductions and end up paying taxes on the income you earned from the hobby. For instance, if you earned $200,000 from a hobby and incurred expenses of $350,000, the … (3 comments)
tax planning: Using Family Loans to Secure Better Home Loan Interest Rates
- 06/12/23 09:02 AM
Here’s some information on how you can help a family member buy a home by making a loan to them while ensuring that you and the family member benefit from a tax-smart loan structure. With the current national average interest rates for 30-year and 15-year fixed-rate mortgages at 6.71 percent and 6.07 percent, respectively, family loans can offer a much more attractive alternative. By charging the Applicable Federal Rate (AFR) as interest, you can give the borrower a good deal without giving yourself a tax headache. The IRS issues new AFRs for term loans every month. The rates for May 2023 are as … (2 comments)
tax planning: Basic Estate Planning
- 06/12/23 08:55 AM
You need an estate plan, regardless of whether or not you are among the ultra-rich. As recent news has shown, even those who have won the lottery or have substantial wealth can fall victim to poor estate planning. While federal estate taxes may not concern you, you need a will to have your wishes honored after your death. Without a will, state law dictates the distribution of your assets, which may not align with your intentions. Additionally, if you have minor children, a will allows you to name a guardian to care for them in the event of your untimely passing. Your heirs … (2 comments)
tax planning: It's not too late: qualify now for your 2020 & 2021 ERC
- 06/05/23 11:35 AM
I am writing about a significant opportunity for your business to qualify for the Employee Retention Credit (ERC). As we are in 2023, you still have the chance to qualify for the ERC for the 2020 and 2021 calendar years and potentially recover a substantial amount of money. The ERC is a refundable tax credit against certain employment taxes. To claim this credit, you must amend your 2020 and 2021 payroll tax returns, which could seem cumbersome but is well worth it considering the financial upside. For a business with a dozen employees and meeting the qualifications for maximum tax credits, you … (1 comments)
tax planning: Claim your overlooked 2020 & 2021 COVID sick & family leave credits today
- 06/05/23 11:27 AM
I am bringing to your attention an opportunity that might result in significant tax benefits for you or your corporation—the unclaimed 2020 and 2021 COVID-19 sick and family leave credits. The IRS allows individuals and corporations to claim these credits to alleviate the pandemic’s impact. But many missed this opportunity on their previous tax returns. If you did not claim these credits for 2020 and 2021, it’s not too late. You can now claim the credit by filing an amended return. Moreover, if you had a net profit of $143,866 on Schedule C or equivalent W-2 wages from your corporation, you could qualify … (2 comments)
tax planning: Ugly rule for owners of S Corporations deducting health insurance
- 06/05/23 11:19 AM
When your S corporation covers or reimburses your more-than-2-percent-shareholder-employee health insurance expenses, it classifies the payments as box 1 W-2 wages but not box 3 or box 5 wages. When calculating the amount eligible for the Form 1040 self-employed health insurance deduction, you must use your Medicare wages (listed in box 5 of Form W-2) as your “earned income” rather than the amount reported in box 1. Here are two examples that show you the impact of this rule: Ted’s S corporation pays him $0 in cash wages and reimburses him $18,000 for health insurance. His W-2 shows $18,000 as box 1 wages … (6 comments)
tax planning: Tax credits for electric vehicles - the latest from the IRS
- 05/03/23 11:56 AM
The IRS recently issued new guidance on electric vehicles. There are four ways you can potentially benefit from a federal tax credit for an EV you place in service in 2023 or later: Purchase an EV and claim the clean vehicle credit. Lease an EV and benefit from the lessor’s EV discount. Purchase a used EV that qualifies for the used EV tax credit. Purchase an EV for business use and claim the new commercial clean vehicle tax credit. The new clean vehicle credit is available through 2032, with a maximum credit of $7,500. To qualify for the clean vehicle credit, you … (3 comments)
tax planning: Tax consequences of a short sale of your principal residence
- 01/23/23 11:04 AM
The real estate boom appears to be over for now. Morgan Stanley predicts that house prices could fall by 10 percent by the end of 2024, perhaps twice as much in a worst-case scenario. Homeowners who purchased their homes at the top of the market could be in trouble, especially if the U.S. falls into a recession. No homeowner wants to go through foreclosure and its credit rating destruction. Fortunately, there is an alternative: a short sale. In a short sale, homeowners sell their home in a regular sale through a real estate agent for less than the amount of their mortgage. The … (4 comments)
tax planning: When cancellation of debt income can be tax-free
- 01/23/23 10:48 AM
Sometimes debts can pile up beyond a borrower’s ability to repay, especially if we are heading into a recession. But lenders are sometimes willing to cancel (forgive) debts that are owed by financially challenged borrowers. While a debt cancellation can help a beleaguered borrower survive, it can also trigger negative tax consequences. Or it can be a tax-free event. General Rule: COD Income Is Taxable When a lender forgives part or all of your debt, it results in so-called cancellation of debt (COD) income. The general federal income tax rule is that COD income counts as gross income that you must report … (1 comments)
tax planning: Crowdfunding: Is it taxable?
- 12/07/22 11:43 AM
Crowdfunding is a national and international phenomenon. Over $17 billion is raised yearly in North America through world-famous websites such as GoFundMe and Kickstarter. All this crowdfunding activity leads to an obvious question: Is the money raised this way taxable income for the recipients? You might be surprised to learn that the courts and the IRS have provided almost no guidance on this issue. The authorities have largely left it up to taxpayers to figure it out by applying general tax principles. Under general tax principles, all income you receive is taxable unless an exception in the tax law makes it tax-free. Some exceptions … (3 comments)
tax planning: Use in-kind RMDs to avoid selling your retirement assets
- 12/07/22 11:38 AM
Are you 72 or older? If so, you must take a required minimum distribution (RMD) from your traditional IRA, SEP-IRA, or SIMPLE IRA by the end of the year. If you turn 72 this year, you can wait until April 1 of next year to take your first RMD—but you’ll also have to take your second RMD by the end of that year. Your RMD is a percentage of the total value of your retirement accounts based on your age and life expectancy. The older you are, the more you must distribute. But here’s the kicker: your RMD must be based on … (1 comments)
tax planning: $80 Billion to the IRS: What it means for you
- 12/07/22 11:34 AM
You may have noticed that the IRS is in a bad way. It has a backlog of millions of unprocessed paper tax returns, and taxpayers can’t get through to the agency on the phone. Congress noticed and took action by passing a massive funding of the IRS in the recently enacted Inflation Reduction Act. The IRS will get an additional $80 billion over the next decade. This includes $35 billion for taxpayer services, operations support, and business systems. Among other things, the IRS plans to use these funds to update its antiquated IT systems (some of which date back to the 1960s), … (0 comments)
tax planning: Meals and Entertainment - what can you deduct?
- 06/03/21 11:40 AM
Have you missed partying and having business meals with your prospects, customers, and employees? Well, get ready to start again. Soon, COVID-19 will behind us. It could be just a few short months away. To help you get ready, check the table below for what you can do in 2021 and 2022 as the law stands now: Green Krist, CPA specializes in assisting taxpayers with IRS and North Carolina Department of Revenue issues in the greater Raleigh, North Carolina area. … (3 comments)
tax planning: Deduct 100 Percent of Your Business Meals under New Rules
- 05/16/21 03:40 PM
Since 1986, lawmakers have limited business meal deductions: first to 80 percent, and then to 50 percent (unless an exception applies). But on December 27, 2020, in an effort to help the restaurant industry due to the COVID-19 pandemic, lawmakers enacted a new, temporary 100 percent business meal deduction for calendar years 2021 and 2022. To qualify for the 100 percent deduction, you need a restaurant to provide you with the food or beverages. The law requires only that the restaurant provide the food and beverages. You don’t have to pay the money directly to the restaurant. For example, you qualify for the 100 … (4 comments)
For 2024, you can elect the de minimis safe harbor to expense assets costing $2,500 or less ($5,000 with audited financial statements or similar).
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