Posts Tagged "tax rules"

Age matters in the world of taxes

Posted on Dec 23, 2014

Are you aware of the numerous age-related provisions in the IRS code? They are probably more plentiful and significant than you thought. Here are a few examples of the age-related tax rules that could affect you and your dependents. * At birth up to age 19 and even 24: dependency deduction. Parents can claim a dependency exemption for a child under 19 or for full-time students under the age of 24. * Under 13: child care credit. This provision gives parents a tax credit for dependent care expenses. * Under 17: child tax credit. If parental adjusted gross income is below a threshold level, parents can claim a child tax credit of $1,000. * At 50: retirement contributions. The government allows extra “catch up” contributions to retirement savings. This is a helpful provision to encourage savings. * Before age 59½: early withdrawal penalty. Withdrawals from IRAs and qualified retirement plans, with some exceptions, are assessed a 10% penalty tax. * At 65: increased standard deduction. Uncle Sam grants a higher standard deduction, but there’s no additional tax benefit if the taxpayer itemizes deductions. * At 70½: mandated IRA withdrawals. The IRS requires minimum distributions from a taxpayer’s IRA beginning at this age (doesn’t apply to Roth IRAs). This starts to limit tax-deferral benefits. Awareness of how the tax code affects you and your family at different ages is important. For tax planning assistance through the various phases of life, give our office a call. 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 the McLean and Tysons Corner, VA. Gilliland & Associates specializes 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 Twitter....

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Plan for the return of some tax break phase-outs

Posted on Dec 10, 2013

Are you familiar with PEP and Pease? Though they sound like a pop duo, the terms refer to tax rules known as phase-outs that can impact how much federal income tax you owe. Phase-outs are reductions in the amount of deductions, credits, and other breaks you can claim on your tax return. Though generally based on adjusted gross income, phase-outs vary in rate, amount, and how they’re calculated. Here’s an overview of PEP and Pease, two tax breaks that are once again subject to phase-out this year. * Personal exemption phase-out (PEP). If you’re married filing jointly for 2013 and your income exceeds $300,000, the PEP will reduce the amount you claim for yourself, your spouse, and your dependents. The personal exemption for 2013 is $3,900. But when PEP applies and your income increases, your deduction is reduced accordingly. * Itemized deduction phase-out. You probably already know that some itemized deductions are limited. For instance, to claim a deduction for medical expenses, your out-of-pocket costs for this year have to exceed 10% of adjusted gross income (AGI). This threshold remains at 7.5% of AGI if you are 65 or older. Miscellaneous itemized deductions, such as unreimbursed employee business expenses, are limited to amounts over 2% of AGI. * There’s also an additional phase-out called the Pease provision that limits the amount of total itemized deductions – after the above reductions. For 2013, Pease kicks in when your income exceeds $300,000 ($150,000 if you’re married filing separately). Other phase-outs limit the amount and deductibility of IRA contributions; the education, adoption, and childcare credits; and the alternative minimum tax exemption. Please call for a review of how phase-outs affect you and what you might be able to do to avoid them. 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 the McLean and Tysons Corner, VA. Gilliland & Associates specializes 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+ <https://plus.google.com/108764776146415485651/posts> , LinkedIn <http://www.linkedin.com/in/gillilandcpa> , Facebook <https://www.facebook.com/gillilandcpa> , and Twitter <https://twitter.com/dnggcpa>...

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What to consider before lending money to family and friends

Posted on Jul 20, 2012

When your best friend views your nest egg as a source of start-up funds for his latest business venture, or your nephew hits you up for a car loan, your first impulse may be to reach into your bank account to help. But it’s a fact that loans to family and friends often end up straining both finances and relationships. As Shakespeare said, “Loan oft loses both itself and friend.” In other words, if you lend money to friends, you often don’t get paid back, and the friendship itself may disintegrate. It’s best to consider a loan to someone you love as an “arm’s length” transaction. If you’re pondering such a loan, keep the following in mind: * You can just say “no.” It’s your money, after all. Do you really want to raid an emergency fund or dip into your child’s college account to finance a friend’s business idea? Think like a bank. It’s reasonable to ask tough questions about the person’s bank accounts, potential sources of income, planned use of loan proceeds, and spending habits before extending credit. * Consider a gift. If you’re comfortable sharing your resources, you may want to provide a monetary gift with no strings attached. In many cases, this is the best solution because neither you nor your friend expect the money to be paid back. Unlike a loan, this type of arrangement can forestall misunderstandings and hurt feelings later on. Of course, you should not give money if doing so would unduly strain your own finances. * Formalize loans. If you decide to lend more than a small amount to a friend or family member, it’s generally best to draft a written agreement. This can be as simple as filling out a promissory note (available online or at office supply stores). Such forms spell out the basic terms of the loan — amount, interest rate, payback period — and provide some limited protection should you and the borrower end up in small claims court. Another recent innovation is the use of direct lending (also called social lending or peer-to-peer lending) websites to facilitate loans between family and friends. For a fee, such sites can prepare loan documentation, send payment reminders, issue regular reports, even facilitate electronic fund transfers. If the loan involves a significant amount of money, check with your attorney. Remember: Many personal relationships have been damaged when loans go awry. So proceed with...

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Consider taxes if you rent out your vacation home

Posted on Jun 14, 2011

Planning to rent out your vacation getaway? When it comes to taking advantage of the tax benefits, timing is an important factor.  Here are two points to remember.  * The fourteen-day-or-ten-percent test. The IRS applies this test to determine if you use your vacation home as a personal residence. If you stay in the home more than 14 days or 10% of the total days it’s rented in a calendar year (whichever is greater), the general rule is you’re using it as your home.  Why does it matter? Because treating a vacation home as your personal residence affects your rental deductions. You’d include all the rent you receive as income on your tax return. But related expenses are generally limited to the amount of that income, meaning you can’t offset other income with a loss. Note that time spent in your vacation home by family members and certain others can count as personal use.  * The less-than-fifteen exception. Rent out your vacation home for less than 15 days during the taxable year, and the income is yours, tax-free. You don’t even have to report it on your return. Just be aware that any expenses related to the rental are nondeductible. If you itemize, you can still deduct qualified mortgage interest and real estate taxes on your vacation home.  Other tax rules, such as passive activity and capital gains reporting, can also impact the decision to rent out your vacation home. Give us a call before you put up that “For Rent” sign. We’ll be happy to review your options under the tax...

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New 1099 reporting rules may be repealed

Posted on Dec 28, 2010

The recent health care reform legislation included a new reporting requirement for businesses. Beginning in 2012, a Form 1099 must be filed with the IRS for payments of $600 or more made to corporations. Previous law required such reporting only for amounts of $600 or more paid to unincorporated businesses. The “Small Business Jobs Act of 2010” added another reporting requirement, this one to take effect January 1, 2011. Landlords will be required to file Forms 1099 with the IRS for payments of $600 or more made for rental property expenses. Responding to the complaints from businesses that these new reporting requirements would be very burdensome, Senate Finance Committee Chairman Max Baucus has announced legislation that would repeal both of these provisions. Stay tuned to see if repeal will actually happen. If it doesn’t, get your business ready for these new...

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