Posts Tagged "tax breaks"

New tax legislation requires planning

Posted on Mar 14, 2018

Though many taxpayers appreciate the income tax cuts in the Tax Cuts and Jobs Act (TCJA) passed late last year, others are skeptical that it will simplify their tax planning. With every simplification, there are many more tax issues that still require planning to realize extra tax benefits. Here are seven of them: Planning for all the moving parts In many ways, the TCJA gives with one hand and takes away with the other. The “giving hand” provides a lower income tax rate structure and a higher standard deduction, while the “taking hand” gets rid of personal exemptions, suspends many itemized deductions and limits deductions that remain. There are many variables that determine whether you come out ahead or behind and a tax planning session can help you figure it all out. Getting creative and flexible about itemizing Many itemized deductions remain the same, others were eliminated completely and some have new limits. For example, while charitable contributions are still a qualified deduction, there is now a $10,000 combined cap on state, local and property tax deductions. The new constraints mean considering creative solutions to maximize these deductions. One idea is to make better use of the donation of appreciated stock as part of your charitable giving. Dealing with new complexity in small business ownership Small business owners and sole proprietors will have to do a complicated calculation to see how much of the 20 percent reduction to pass-through qualified business income they can take. It depends on your profession and your expenditures on capital and wages. This calculation can get complicated very quickly. Understanding the newly changed “marriage penalty” The disadvantage for married couples within the tax code is still very much in place, but it is changing. For instance, the marriage penalty that had given unfavorable income tax rates to married joint filers when compared to single individuals goes away in the TCJA for most income levels. But it rears its head again in the $10,000 combined state, local and property tax limitation, which does not double for married joint filers. This is something you’ll have to plan around. Getting credit for your kids There are many new tax benefits for parents in the TCJA. The child tax credit doubles to $2,000 and the phaseout threshold jumps to $400,000 from $110,000 previously for joint filers, making it available to more taxpayers. Dependents ineligible for the child tax credit can qualify for a new $500 per-person family tax credit. On top of that, distributions from 529 education savings plans can now be used to pay private school tuition for K-12 students. Adjusting to disappearing tax breaks If your tax planning was built on any of the following expiring tax provisions, you’ll have to change your plan: personal exemptions; miscellaneous itemized deductions; home equity interest; alimony deductions (expiring in 2019); the additional child tax credit; theft and casualty losses; and the domestic production activity deduction (DPAD) Facing the old complexities Many areas of the tax code remain largely the same and contain both potential pitfalls and opportunities to find tax savings. Managing capital gains and tax-loss harvesting, charitable activity deductions and a tax-advantaged retirement strategy are just a few areas where you can unlock extra value with smart planning. The big changes to tax reform this year may be disconcerting at first, but in change there is opportunity. After the dust settles on the 2017 tax season, get ready to take a detailed look at what 2018 tax reform means for you. 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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4 Business Year-End Tax Moves

Posted on Dec 12, 2017

Even though the end of 2017 is near, it is not too late to get your business into the best possible tax position for the new year. Here are some year-end tax moves to consider: Update the office. A fresh coat of paint and new office furnishings not only make your place of business more comfortable, they also provide another tax deduction. How you handle deducting these expenses will vary depending upon whether you own or lease your office space, so reach out for assistance if you have questions. Reward your staff. If you have sufficient cash flow, giving your staff a yearend bonus is a great way to let them know you appreciate them. It’s also tax deductible. Update your skills. Attend a workshop or conference to improve your professional skills. While there are some limitations, many travel, lodging and out-of-pocket expenses related to professional training are tax-deductible. Be nimble. Recent discussions in Congress could mean a dramatic change in taxes on business profits beginning in 2018. Stay abreast of these developments in case you need to make last-minute moves to shift profits from one year to the next to reduce your tax rate. There are a lot of nuances in the tax code affecting each of these end-of-year moves. Don’t hesitate to get in touch if you need...

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Year-end tax checklist

Posted on Nov 5, 2017

As the year draws to a close, there are several tax-saving ideas you should consider.Use this checklist to make sure you don’t miss an opportunity before the year is out. Retirement distributions and contributions. Make final contributions to your qualified retirement plan, and take any required minimum distributions from yourretirement accounts. The penalty for not taking minimum distributions can be high. Investment management. Rebalance your investment portfolio, and take any final investment gains and losses. Capital losses can be used to net against your capital gains. You can also take up to $3,000 of capital losses in excess of capital gains each year and use it to lower your ordinary income. Last-minute charitable giving. Make a late-year charitable donation. Even better, make the donation with appreciated stock you’ve owned more than a year. You can often can make a larger donation – and get a larger deduction – without paying capital gains taxes. Noncash contribution opportunity.Gather up noncash items for donation,document the items and give those in good condition to your favorite charity. Make sure you get a receipt from the charity, and take a photo of the items donated just in case. Gifts to dependents and others.You may provide gifts to an individual tax-free of up to $14,000 per year in total. Remember that all gifts given (birthdays, holidays, etc.) count toward the total. Organize records now.Start collecting and organizing your end-of-year tax records. Estimate your tax liability and make any required estimated tax...

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Business tax: time to consider Section 179?

Posted on Oct 25, 2017

Section 179 expensing can be a very powerful tax-planning tool for small- and medium-sized businesses acquiring capital assets. While it doesn’t change the amount of depreciation you can take over the life of a capital purchase, it can change the timing by allowing you to deduct your purchase in the first year you place it in service. Review these details if you’re considering depreciating your business assets under Section 179: Section 179 allows deducting the expense of up to $510,000 of qualified business purchases. A Section 179 deduction cannot create a loss for the business. A Section 179 deduction must be for business use. If an asset is not entirely used for business, the allowance is reduced. If you sell a Section 179 asset prior to the full depreciation period, you will have to record any sales proceeds as taxable income. Many states limit the use of this federal shifting of depreciation. Taking Section 179 for capital purchases can be useful, but it’s not for everyone. Using it for an immediate tax break means it’ll no longer be available for future...

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Contractor or Employee? Knowing the difference is important

Posted on Sep 28, 2017

Is a worker an independent contractor or an employee? As an employer, getting this wrong could land you with an IRS audit and cost you plenty in many other ways.Here’s what you should know: As the worker: If the worker is a contractor and not considered an employee, he/she must: Pay self-employment taxes (Social Security and Medicare-related taxes). Make estimated federal and state tax payments. Handle his/her own benefits, insurance and bookkeeping. As the employer: You must ensure your employee versus independent contractor determination is correct. Getting this wrong in the eyes of the IRS can lead to: Payment and penalties related to Social Security and Medicare taxes. Payment of possible overtime, including penalties for a contractor reclassified as an employee. A legal obligation to pay for benefits. When the IRS recharacterizes an independent contractor as an employee, they look at the business relationship between the employer and the worker. The IRS considers if the employer has the right to control the work (when, how and where the work is done) and the financial relationship (i.e., a contractor has a contract and customers, and invoices the company). The more reasonable your basis for classification and the more consistently it is applied, the more likely an independent contractor classification will not be...

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