Posts Tagged "income"

Don’t forget your midyear tax-planning

Posted on Jun 15, 2018

Can you believe 2018 is already half over? If you haven’t thought about your 2018 tax situation yet, it’s time to do so. At this point, you should have a good idea what your income and deductions will be. With all the big tax law changes that take effect this year, you need to start planning now if any of them will impact you. Don’t procrastinate or you could end up paying more tax in 2018 than necessary. Contact us to schedule your midyear review. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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Changes to the kiddie tax

Posted on Feb 23, 2018

The Tax Cuts and Jobs Act has changed the way unearned income is taxed for your children. In the past, interest, dividends and other unearned income used to be taxed in phases. The first $1,050 was tax-free, the next $1,050 was taxed at the child’s rate and any additional was taxed at the parent’s tax rate. The act now calls for all of a child’s unearned income to be taxed using the estate and trust tax table. Call us if you have questions about how the changes will affect your situation. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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Looking ahead: Tax reform in 2018

Posted on Jan 17, 2018

Congress has passed tax reform that will take effect in 2018, ushering in some of the most significant tax changes in three decades. Here are some major items in the new bill that impact individual taxpayers. Reduces income tax brackets. The bill retains seven brackets, but at reduced rates, with the highest tax bracket dropping to 37 percent from 39.6 percent. Double standard deductions. The standard deduction nearly doubles to $12,000 for single filers and $24,000 for married filing jointly. To help cover the cost, personal exemptions and most additional standard deductions are suspended. Limits itemized deductions. Many itemized deductions are no longer available, or are now limited. Here are some of the major examples: Caps state and local tax deductions. State and local tax deductions are limited to $10,000 total for all property, income and sales taxes. Caps mortgage interest deductions. For new acquisition indebtedness, mortgage interest will be deductible on indebtedness of no more than $750,000. Existing mortgages are unaffected by the new cap as the new limits go into place for acquisition indebtedness after Dec. 14, 2017. The act also suspends the deductibility of interest on home equity debt. Limit on theft and casualty losses. Now only available for federally declared disaster areas. No more 2 percent miscellaneous deductions. Most miscellaneous deductions subject to the 2 percent of adjusted gross income threshold are now gone. Cuts some above-the-line deductions. Moving expense deductions get eliminated except for active-duty military personnel, along with alimony deductions beginning in 2019. Weakens the alternative minimum tax (AMT). The bill retains the alternative minimum tax but changes the exemption to $109,400 for joint filers and the phaseout threshold to $1 million. The changes mean the AMT will affect far fewer people than before. Bumps up child tax credit, adds family tax credit. The child tax credit increases to $2,000 from $1,000, with $1,400 of it being refundable even if no tax is owed. The phaseout threshold increases sharply to $400,000 from $110,000 for joint filers, making it available to more taxpayers. Also, dependents ineligible for the child tax credit can qualify for a new $500-per-person family tax credit. Expands use of 529 education savings plans. Qualified distributions from 529 education savings plans, which are not subject to tax, now include tuition payments for students in K-12 private schools. Doubles estate tax exemption. Estate taxes will apply to fewer people, with the exemption doubled to $11.2 million ($22.4 million for a married couple). Reduces pass-through business taxes. Most owners of pass-through entities such as S corporations, partnerships and sole proprietorships will see their income tax lowered with a new 20 percent income reduction calculation. Because major tax reform like this happens so seldom, it’s worth scheduling a tax-planning consultation early in the year to ensure you reap the most tax savings possible during 2018. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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A MARRIAGE PENALTY LINGERS IN THE TAX CODE

Posted on Jul 26, 2017

A marriage is worth celebrating, but bringing up the marriage penalty may bring down the celebration. The marriage penalty occurs in the tax code when you pay more tax as a married couple than you would as two single filers making the same amount of money. This occurs throughout the federal tax code. The following are two examples: The tax rate problem If the tax tables did not differentiate between single and married, you could assume the married income required to move to the next highest tax rate would always be double that of a single filer. This is not the case. As an example, when you’re a single filer, income above $91,901 is taxed at 28%. When you file a joint return with your spouse, the 28% rate starts at $153,101. You will notice that the beginning of the 28% tax bracket for married couples ($153,101) is not twice the $91,901 amount applied to each of you when you were single. The outcome is an increase in tax on your combined income over what you would have paid individually. Accelerating the phase-outs Another example of the marriage penalty occurs in the acceleration of phase-outs of personal exemptions and itemized deductions for married couples versus single filers. These deductions begin when your adjusted gross income (AGI) is greater than $313,800 if you’re married filing a joint return and $261,500 when you’re single. Think the marriage penalty only impacts upper income? Even the Earned Income Tax Credit (EITC) phase-outs favor single taxpayers over married taxpayers. A single mother of three can qualify for the EITC with income less than $48,340, where a married couple loses the EITC with combined income over $53,930. Not surprisingly, there are some couples who simply decide not to marry to avoid the penalty, but obviously this option isn’t right for all couples. If you are planning to marry in the near future, do not be caught by surprise with a larger than expected tax bill. Call to review your situation. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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TAX-FREE INCOME

Posted on Jul 12, 2017

Yes, that’s correct, there are some forms of income you receive that may be tax-free. Here is a list of ten common sources of tax-free income. Gifts. Gifts you receive are not taxable income to you. In fact, they are not subject to gift tax to the person giving the gift as long as the gifts received in one year from one person do not exceed $14,000. Rental income. If you rent your home or vacation cottage for up to 14 days, that rental income does not need to be reported. Child’s income. Up to the standard deduction amount ($6,350 in 2017) in earned income (wages) and $1,050 in unearned income (interest) for children is not taxed. Excess earnings above these amounts could be taxed and $2,100 in unearned income is taxed at the parent’s tax rate. Inheritance. In most states, beneficiaries typically do not pay tax on the value of what they inherit. When inherited property is sold by the beneficiary, however, there may be a capital gains tax obligation. Roth IRA earnings. As long as you meet this retirement account type’s rules, earnings in a Roth IRA are not taxed. Life insurance received. The full value of life insurance received is not taxable income. However, the proceeds may be taxable within the estate of the deceased policyholder. Child support revenue. Income you receive as child support is not deemed to be taxable income. On the other hand, alimony received is taxable income. Home sales gains. Up to $250,000 ($500,000 for married filing jointly) in gains on the sale of a qualified principal residence is not taxable. Scholarships/fellowships. Money received to cover tuition, fees, and books for degree candidates is not generally taxable. Refunds. Federal refunds (technically you’ve already accounted for this income) and most state refunds for non-itemizers are also tax-free. This is by no means a complete list of tax-free income, but it’s nice to know that some areas of tax law still benefit taxpayers. Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and...

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