Posts Tagged "investments"


Posted on Oct 4, 2017

Though the markets have been up strongly this year, your investment portfolio may have a few lemons in it. By using the tax strategy of tax-loss harvesting, you may be able to turn those lemons into lemonade. Here are some tips: Tip #1: Separate short-term and long-term assets. Your assets can be divided into short-term and long-term buckets. Short-term assets are those you’ve held for a year or less, and their gains are taxed as ordinary income. Long-term assets are those held for more than a year, and their gains are taxed at the lower capital gains tax rate. A goal in tax-loss harvesting is to use losses to reduce short-term gains. Example: By selling stock in Alpha Inc., Sly Stocksale made a $10,000 profit. Sly only owned Alpha Inc. for six months, so his gain will be taxed at his ordinary income tax rate of 35 percent (versus 15 percent had he owned the stock more than a year). Sly looks into his portfolio and decides to sell another stock for a $10,000 loss, which he can apply against his Alpha Inc. short-term gain. Tip #2: Follow netting rules. Before you can use tax-loss harvesting, you have to follow IRS netting rules for your portfolio. Short-term losses must first offset short-term gains, while long-term losses offset long-term gains. Only after you net out each category can you use excess losses to offset other gains or ordinary income. Tip #3: Offset $3,000 in ordinary income. In addition to reducing capital gains tax, excess losses can also be used to offset $3,000 of ordinary income. If you still have excess losses after reducing both capital gains and $3,000 of ordinary income, you carry them forward to use in future tax years. Tip #4: Beware of wash sales. The IRS prohibits use of tax-loss harvesting if you buy a “substantially similar” asset within 30 days before or after selling it at a loss. So plan your sales and purchases to avoid this problem. Tip #5: Consider administrative costs. Tax-loss harvesting comes with costs in both transaction fees and time spent. One idea to reduce the hassle is to make tax-loss harvesting part your annual tax planning strategy. Remember, you can turn an investment loss into a tax advantage, but only if you know the rules. 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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Reasons to incorporate your business

Posted on Jun 27, 2017

Here are some reasons you may want to consider incorporating your growing business. Protect your personal assets from creditors. When you operate your business within a corporation, creditors are often limited to corporate assets to satisfy a debt. Your home, savings, and retirement accounts are no longer fair game. Provide a personal liability firewall. The corporate form can help protect you against claims made by others for injuries or losses arising from actions of your business. Issue shares of stock. You can help build your business by issuing shares to new investors, or by offering stock options to key employees as a form of compensation. Gain tax flexibility. A corporation can provide you with more tax flexibility.Deliberate planning can help optimize the taxable division between corporateincome, dividends, and your personal wages. Enhance your business presence. Being incorporated sends a signal that your business is a serious enterprise and it could open doors to opportunities not offered to sole proprietors. Consumers, vendors, and other businesses often prefer to do business with incorporated companies. If you are still going over the pros and cons of incorporating your business, pick up the phone. Together, we can complete a thorough tax review that will help shed light on the impact such a move will have on your business...

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Springtime remodeling – know the tax impacts

Posted on Apr 22, 2017

Spring fever often influences homeowners to update and remodel. Maybe you’re considering a new project, too. You may need to replace your deck or remodel your kitchen. If you have a remodeling project coming up, you should understand the tax consequences. If your project qualifies as an improvement to your home, you’ll enjoy some tax benefits. But if the project is a repair, there’s generally no tax benefit. Unfortunately, it’s not always easy to tell the difference. An improvement is defined by the IRS as something that adds value to your home or extends its life. Putting in a new kitchen, building an extension or adding a new deck are considered improvements because they add value. Replacing the roof is an improvement because it extends the life of your home. On the other hand, a repair merely keeps the home in good working order. Examples of repairs include painting the interior or exterior or replacing a few missing shingles. You can get tax benefits by adding the cost of your home improvements to your original cost basis. That’s the amount you first paid for the home. When you sell, a higher cost basis means a smaller capital gain. And generally you’ll only pay tax on a capital gain greater than $500,000 ($250,000 for singles). So, the smaller your capital gain, the less likely you are to owe tax when you sell. That’s why it’s important to save bills and receipts for any projects that may qualify as improvements. Include notes that describe the related home improvement. You may need to keep these receipts for years until you sell your home. But when you do, these updates could be the key to reducing a possible tax bill. If you want to know whether your project is a repair or an improvement, please call our...

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IRS interest rates remain the same for second quarter 2017

Posted on Apr 20, 2017

Interest rates charged by the IRS on underpaid taxes and applied by the IRS on tax overpayments will remain the same for the second quarter of 2017 (April 1 through June 30). Therefore, the rates will be as follows for individuals and corporations: For individuals: 4% charged on underpayments; 4% paid on overpayments. For corporations: 4% charged on underpayments; 3% paid on overpayments. 6% charged on large corporate underpayments. 1.5% paid on the portion of a corporate overpayment exceeding...

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More credits require questions

Posted on Mar 25, 2017

Common errors have helped to make the Earned Income Tax Credit (EIC) a major source of what the IRS calls “improper payments.” The agency estimates that of the $66 billion in EIC funds paid in 2015, nearly a quarter were collected by filers who didn’t qualify to receive them. To help combat this problem, the IRS now requires additional confirmation of information regarding the EIC and three new credits beginning in 2016. Now if you claim the EIC, the Child Tax Credit (CTC), the Additional Child Tax Credit (ACTC), or the American Opportunity Tax Credit (AOTC), additional information may be requested of you. For the CTC and ACTC, you may be asked how long your children lived with you over the past year, or whether they lived with an ex-spouse, relatives, or other guardian. If you are eligible for the AOTC, which is a credit to defray as much as $2,500 in higher education costs for you or your children, you will need to provide Form 1098- T from the college or university. You will also need receipts for related expenses. You may also be asked to double-check your social security numbers and dates of birth for the dependents on your return, as these are two common sources of error. If you get more questions than usual or are asked for additional documents, be aware that it’s just a new reporting requirement required by the...

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