Category: Blog

Working at a tender age is an American tradition. What isn’t so traditional is the notion of kids contributing to their own IRA, especially a Roth IRA. But it should be a tradition, because it’s a really good idea. Here’s what you need to know about IRAs for kids. Let’s start with the Roth IRA option. Roth IRA Contribution Basics The only federal-income-tax-law requirement for a child to make an annual Roth IRA contribution is to have enough earned income during the year to cover the...

These days, some IRA owners and investors may be worried about being overexposed to equities. That could be you. But the safest fixed income investments (CDs, Treasuries, and money-market funds) are still paying microscopic interest rates. For example, when this was written, the 10-year Treasury was yielding about 1.92 percent. Ugh! Meanwhile, the pandemic might or might not be coming to an end, the economy might or might not be okay, and inflation might or might not be controlled. Who...

If you do some work at home, you’re probably using your home internet connection. Are your monthly internet expenses deductible? Maybe. The deduction rules depend on your choice of business entity (proprietorship, corporation, or partnership). Deduction on Schedule C If you operate your business as a sole proprietorship or as a single-member LLC, you file a Schedule C to report your business income and expenses. As a Schedule C taxpayer, you may deduct ordinary and necessary expenses,...

Do you own or lease non-residential (think commercial) real property for your business or rent non-residential real property to others? If so, interior improvements you make to the property may be fully deductible in a single year instead of over multiple years. But to be deducted instantly, the improvements must fit into the category that the tax code calls “qualified improvement property” (QIP). What Is QIP? Ordinarily, non-residential real property is depreciated over 39 years....

The strategy behind creating an S corporation and then selling your home to that S corporation comes into play when you want to convert your home to a rental property and take advantage of the exclusions, oryou need more time to sell the home to realize the benefits of the $250,000 exclusion ($500,000 if filing a joint return). With this strategy, one question often comes up: “If a married couple sells their home to their S corporation to be a rental property, can the owners be the renters?” Answer:...

As a business owner, you are obligated to collect and remit payroll taxes for your employees. But you are not required to collect and remit payroll taxes for independent contractors. That’s why it’s important to correctly classify workers as either employees or independent contractors. But here’s the problem: the rules for correctly classifying workers as either employees or independent contractors are unclear and confusing. And what happens if you misclassify a worker as an independent...

When you own rental property, depreciation is your best friend. One reason depreciation is so valuable is that, unlike deductible rental property expenses such as interest and maintenance, you get to claim depreciation year after year without having to pay anything beyond your original investment in the property. Moreover, rental real property owners are entitled to depreciation even if their property goes up in value over time (as it usually does). The basic idea behind depreciation...

When you use a home for both rental and personal use, regardless of that home’s location at the beach or in the city, you run into the tax code’s vacation home rules that make that home either a residence or a rental property. It’s a residence when you rent it for more than 14 days during the year anduse it for personal purposes for more than the greater of 14 days or 10 percent of the days that you rent the home out at fair market rates. Example. You own a beachfront vacation condo....

The tax code says, “The term ‘net earnings from self-employment’ means the gross income derived by an individual from any trade or business carried on by such individual . . .” The Supreme Court ruled that to be in a trade or business, you need to be involved with continuity and regularity and that a sporadic activity does not qualify. In Batok (T.C. Memo 1992-727), the court ruled that John Batok’s installation of windows did not rise to the level of a trade or business. Mr. Batok’s activity,...

Tax-advantaged retirement accounts such as IRAs are a great way to save for retirement. But when you establish a traditional IRA with a bank, a brokerage, or a trust company, you are ordinarily limited to a narrow range of investment options, such as CDs, publicly traded stocks, bonds, mutual funds, and ETFs. The IRA custodian will not permit you to invest in alternative investments such as real estate, precious metals, or cryptocurrency. A self-directed IRA could be for you if you want...