Posts Tagged "Tax"

Ten tax tips for individuals

Posted on Jul 20, 2018

Frequent tax law changes have made the tax code very complicated; only the informed taxpayer can take advantage of tax-cutting opportunities that remain. Here are some suggestions you should consider if you’re interested in cutting your taxes. 1. Reduce your consumer debt. The interest you pay on consumer debt is not deductible. Consider shifting consumer debt to a home-equity loan (where available and not to exceed $100,000) to maintain deductibility for the interest. Don’t rush into anything, however. Consider loan origination costs and points you may have to pay. Also, realize that if you can’t make the payments on the home-equity loan, you could lose your house. 2. Rehabilitate an old building. One tax break that may be attractive to you is the credit for rehabilitating old buildings – either commercial or certified historic structures. If you don’t want to do the work yourself, consider investing in partnerships that rehabilitate old structures. 3. Watch for AMT liability. The alternative minimum tax (AMT) is the one you pay when too many tax preference items reduce your regular tax below a certain amount. If you use preference items to reduce your taxes – such as accelerated depreciation, private activity bond interest, etc. – you may want to shift income and deductions to keep the alternative minimum tax from applying to you. 4. Time any change in marital status with a view to minimizing taxes. Among the areas that could be affected are deductibility of IRA contributions, lost itemized deductions, and a shift to a different tax bracket. You might be able to cut your tax bill by delaying or accelerating a marriage or divorce. 5. Contribute to a retirement plan. Retirement plans are still an excellent tax shelter. Consider a a retirement account strategy to reduce your self-employed income, even part-time or in a second business. If you’re an employee, find out if your company has a 401(k) or other plan and make contributions to it. If you qualify, you should also consider an IRA. 6. Use your vacation home wisely. If you own a second or vacation home, find out whether you get a better tax break by treating the property as a second residence or as a rental property. The number of days you personally use the home is crucial, so get details immediately. 7. Avoid the “kiddie” tax. Check the income of any children under the age of 19 (24 for full-time students). Unearned income beyond a certain amount will be taxed at your highest rate. Shifting investments or making other adjustments may be appropriate. 8. Make your hobby a business. If you’re making money from a hobby, turn your hobby into a business so that you can write off your expenses. You must be able to demonstrate that you engaged in the activity for a profit. To do that, conduct the activity as a business. Keep records, and get a separate bank account for the activity. The IRS will expect your sideline business to show a profit in three out of five years, or you’ll have to prove your profit motivation in order to deduct losses. 9. Don’t overlook medical deductions. If you help to support an elderly relative who lives in a nursing home for medical reasons, the cost of the nursing home may qualify for the medical deduction. If you make improvements to your home for medical reasons, the cost of such improvements are medical expenses to the extent the improvements do not increase the value of your home. That includes such things as widening doorways for wheelchair use or modifying the home to accommodate an individual with a medical problem. 10. Take the child care credit if you qualify. If you pay for child care services while you work or go to school, you may qualify for the child care credit. The credit is allowed only for children under the age of 13. You must report on your tax return the name, address, and taxpayer identification number of the care provider. There are other tax-cutting strategies in addition to those mentioned here. If you...

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The Kiddie Tax

Posted on Jul 16, 2018

The term “kiddie tax” was introduced by the Tax Reform Act of 1986. The IRS introduced this rule to keep parents from shifting their investment income to their children and have this income taxed at their child’s lower tax rate. The law requires a child’s unearned income (generally dividends, interest, and capital gains) above a certain amount ($2,100 in 2017) to be taxed at their parent’s tax rate. Here is what you need to know. Who it applies to •Children under the age of 19 •Children under the age of 24 if a full-time student and providing less than ½ of their own financial support •Children with unearned income above $2,100 Who/What it does NOT apply to •Earned income (wages and self-employed income from things like babysitting or paper routes). •Children that are over age 18 and have earnings providing more than ½ of their support. •Older children married and filing jointly •Children over age 19 that are not full-time students •Gifts received by your child during the year How it works •The first $1,050 of unearned income is generally tax-free •The next $1,050 of unearned income is taxed at the child’s (usually lower) tax rate •The excess over $2,100 is taxed at the parent’s rate either on the parent’s tax return (Form 8814) or on the child’s tax return (Form 8615) What to know/do now 1.Maximize your low tax investment options. Look to generate gains on your child’s investment accounts to maximize the use of your child’s kiddie tax threshold each year. You could consider selling stocks to capture your child’s investment gains and then buy the stock back later to establish a higher cost basis. 2.Be careful where you report a child’s unearned income. Don’t automatically add your child’s unearned income to your tax return. It might inadvertently raise your taxes in surprising ways by exposing more income to the Alternative Minimum Tax or reducing your tax benefits in other programs like the American Opportunity Credit. 3.Leverage gifts. If your children are not maximizing their tax-free investment income each year consider gifting funds to allow for unearned income up to the kiddie tax thresholds. Just be careful, as these assets can have an impact on a child’s financial aid when approaching college age years. Properly managed, the “kiddie tax” rules can be used to your advantage. But if not properly managed, this part of the tax code can create an unwelcome surprise at tax time. 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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2018 Health Savings Account Limits

Posted on Jul 13, 2018

The savings limits for the ever-popular Health Savings Accounts (HSA) are now set for 2018. The new limits are outlined here with current year amounts noted for comparison purposes. What is an HSA? An HSA is a tax-advantaged savings account to pay for qualified health care costs for you, your spouse, and your dependents. When contributions are made through an employer, they are made on a pre-tax basis. There is no tax on the withdrawn funds, the interest earned, or investment gains as long as the funds are used to pay for qualified medical, dental, and vision expenses. Unused funds may be carried over from one year to the next. To qualify for this tax-advantaged account you must be enrolled in a “high deductible” health insurance program as defined by HSA rules. The limits Annual HSA limits for 2018 $3,450 self $6,850 family add $1,000 for age 55+ catch-up provision Note: To qualify for an HSA you must have a qualified High Deductible Health Plan (HDHP). A plan must meet minimum deductible requirements that are typically higher than traditional health insurance. In addition, your coverage must have reasonable out-of-pocket payment limits as set by the above noted maximums. Not sure what an HSA is all about? Check with your employer. If they offer this option in their health care benefits, they will have information discussing the program and its potential benefits. 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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Tips to Maximize Your Mileage Deduction

Posted on Jun 27, 2018

Each year standard mileage rates for business travel, medical driving, moving mileage and mileage rates for charitable driving are set by the IRS. Too often this deduction is overlooked because proper documentation was not followed. Here are a few tips to ensure you receive the full benefit of this tax deduction. Tip 1: Track your applicable mileage in an auto log. This log is required to ensure your deduction is not disallowed during the course of an audit. Please make sure the business/charitable/medical purpose, date and distance is clearly noted. Tip 2: Also keep track of parking, tolls and other miscellaneous travel expenses. These can often be deducted in addition to the standard mileage rate. Tip 3: Submit expense reports if your mileage can be reimbursed. Most employers will reimburse you for business mileage at the approved rate, but many employees fail to ask for reimbursement. Remember, your employer can deduct this reimbursed expense on their tax return as well. Tip 4: Keep track of medical miles. Even though you need to surpass a percent of your income prior to taking medical expenses as an itemized deduction, still keep track of qualified medical miles. It often only takes one major medical bill to make all your other excess medical expenses deductible. Tip 5: Plan your business trips to ensure your miles are deductible. Commuting miles to and from work is not deductible. However, if you stop off at a supplier first, then the mileage from the supplier to your workplace is a deductible expense. Tip 6: Do not forget charitable miles. This deduction is one of the most often overlooked deductions. Do you drive for Meals on Wheels or for a school function? Do you volunteer as a coach for a non-profit sporting group? These miles add up over time and are often not properly documented. 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 Twitter....

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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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