Category: Blog

Once upon a time, you could convert a rental property or vacation home into your principal residence, occupy it for at least two years, sell it, and take full advantage of the home sale gain exclusion privilege of $250,000 for unmarried individuals or $500,000 for married joint-filing couples. Unfortunately, legislation enacted back in 2008 included an unfavorable provision for sales that occur after that year. The provision can make a portion of your gain from selling an affected residence...

After reaching age 50, you can make additional “catch-up” contributions to certain types of tax-advantaged retirement accounts. For the 2021 tax year, this opportunity is available if you’ll be age 50 or older on Friday, December 31, 2021. Specifically, with an employer-sponsored 401(k), 403(b), 457, or SIMPLE plan, you can make extra salary-reduction catch-up contributions to your account—assuming the plan allows catch-up contributions. If you are self-employed and have set up a 401(k)...

Real estate values have surged in many parts of the country and are still surging in some areas. That’s good news if you’ve been holding raw land for investment. You might be ready to cash in by subdividing and developing your acreage and selling off parcels for big profits. Great, but what about taxes? Good question, because there’s a big issue to consider.    The Tax Issue When you subdivide, develop, and sell land, you’re generally deemed for federal income tax purposes...

If you hire an employee for your Schedule C business, you can qualify for several valuable tax credits. Each credit is different, and certain limitations apply to all or most employer tax credits. Remember, tax credits are the best. They beat deductions. Note the difference below (using the 32 percent bracket): A $1,000 deduction for wages reduces your income taxes by $320.A $1,000 credit reduces your taxes by $680 ($1,000 – $320). Many tax credits are not available if you hire...

When the individual production activity of a partner is outside his or her capacity as a member of the partnership, the partnership has two choices: Allocate the production income to the partner, and have the partner treat the expenses as unreimbursed partner expenses (UPE).Treat the partner as a 1099 independent contractor for the individual production. Unreimbursed Partner Expenses As a partner in a partnership, you generally can’t deduct any of the partnership expenses on your individual...

If you are thinking of getting married or divorced, you need to consider December 31, 2021, in your tax planning. Here’s another planning question: Do you give money to family or friends (other than your children, who are subject to the kiddie tax)? If so, you need to consider the zero-taxes planning strategy. And now, consider your children who are under age 18. Have you paid them for work they’ve done for your business? Have you paid them the right way? Here are five strategies to...

All small-business owners with one to 49 employees should have a medical plan for their business. Sure, it’s true that with 49 or fewer employees, the tax law does not require you to have a plan, but you should. Most of the tax rules that apply to medical plans are straightforward when you have 49 or fewer employees. Here are six opportunities for you to consider: Make sure to claim the federal tax credit equal to 100 percent of required (2020) and voluntary (2021) emergency sick...

The purpose of this letter is to get the IRS to owe you money. Of course, the IRS is not likely to cut you a check for this money (although in the right circumstances, that will happen), but you’ll realize the cash when you pay less in taxes. Here are six powerful business tax deduction strategies that you can easily understand and implement before the end of 2021. 1. Prepay Expenses Using the IRS Safe Harbor You just have to thank the IRS for its tax-deduction safe harbors. IRS...

When you take advantage of the tax code’s offset game, your stock market portfolio can represent a little gold mine of opportunities to reduce your 2021 income taxes. The tax code contains the basic rules for this game, and once you know the rules, you can apply the correct strategies. Here’s the basic strategy: Avoid the high taxes (up to 40.8 percent) on short-term capital gains and ordinary income.Lower the taxes to zero—or if you can’t do that, then lower them to 23.8 percent or...

When you travel out of town overnight, you need to know the tax-home rule. The IRS defines your tax home, and it’s not necessarily in the same town where you have your personal residence. If you have more than one business location, one of the locations will be your tax home. It’s generally your main place of business. In determining your main place of business, the IRS takes into account three factors: the length of time you spend at each location for business purposes;the degree of...