Posts Tagged "taxes"

Parents, Children, and Taxes

Posted on Jun 20, 2018

  Being a parent brings tremendous rewards, but also the challenge and responsibility of supporting and educating your child. Fortunately, the tax code has many ways to help ease a parent’s financial burden. Here’s an overview of the many ways that taxes can affect your decisions as a parent. Exemptions and credits   Being a parent usually cuts your tax bill in at least two ways. You can generally claim a dependency exemption for each child under age 19, or under age 24 for full-time students. You can also claim a child tax credit for each child under age 17. This is a direct credit against taxes you owe, and it can be partially refundable. Other credits include the adoption credit to offset expenses of adoption and the child care credit. This credit allows you to offset some of the costs of paying for child care so that both spouses can work or attend school full-time. Many of these tax breaks phase out for those at higher income levels. Education expenses   One of the biggest challenges for a parent is funding a child’s college education. A variety of tax breaks can help with this major expense, including savings plans, tax credits, and tax deductions. These measures all have different rules and eligibility requirements. There are two main types of savings plans for education expenses: Coverdell education savings accounts and Section 529 plans. Coverdell accounts work rather like an IRA. Contributions grow tax-free, and withdrawals are free of tax if used for qualified education expenses. Coverdell accounts can also be used to pay for K-12 expenses as well as college costs. Section 529 plans provide tax-free earnings and distributions for higher education expenses, and they generally have fewer restrictions than Coverdell accounts. The American Opportunity credit and the Lifetime Learning Credit are two tax credits available for education expenses. Each has its own rules and income limits, and you cannot use both credits for the same child in the same year. A limited tax deduction is available for student loan interest expense. In addition, interest on U.S. savings bonds can be tax-free if the bonds are used for education expenses. Child tax issues   The “kiddie tax” is a rule that affects the investment income of children. A child’s unearned income above a threshold amount will be taxed at the parent’s highest rate until the child reaches a certain age. The intent is to stop a high-income parent from shifting large amounts of earnings to a child in a lower tax bracket. A strategy of “income shifting” can make sense for a family once the child is old enough to escape the kiddie tax. Parents can gift income-earning assets to older children (subject to the annual and lifetime gift limits), and the children will pay tax on the income earned at their own (presumably lower) rates. Another tax-cutting strategy is to employ your child in the family business. The business can take a deduction for wages paid, while the child often pays little or no taxes on his or her earnings. It must be a real job, though, and the wages must be reasonable for the work. If your children have earnings from summer or after-school jobs, encourage them to open IRA accounts. The additional years of tax-free compounding can produce huge additional savings by the time your children reach retirement age. Don’t overlook the role of grandparents. They can help pay college expenses, for example, either by contributing to education savings plans or by paying tuition bills directly. Also, by giving appreciated stock to their grandchildren, they may be able to boost the children’s savings while reducing overall taxes for the family unit. Estate planning   For a parent, estate planning is especially important. The first priority is to make sure your children are protected in the event that something happens to you. Your estate plan should appoint guardians for your minor children, as well as provide for their financial well-being. Early estate planning can also help to ensure that your assets pass to your children as you...

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Avoid tax return mistakes

Posted on Mar 23, 2018

As you file your 2017 tax return this season, make sure you don’t fall victim to some of the easiest mistakes made each year. Math errors, misspelled names, wrong bank account numbers and omitted Social Security numbers are just a few of the errors that have seriously delayed taxpayers’ refunds in the past. The best advice? Review every form you fill out not once, but MULTIPLE times. And work with a trusted tax professional who can help you make sure your forms are correct. Call us for an appointment. 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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More tax breaks available for 2017 tax returns

Posted on Mar 2, 2018

Several tax breaks were revived for use in 2017 tax filing by last month’s federal budget bill. Among them are four you may be able to take advantage of: the tuition and fees deduction, the mortgage insurance deduction, the mortgage debt forgiveness exclusion and the energy-efficient home improvement credit. Give us a call if these tax breaks should be considered for your 2017 tax return. 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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Want to give this year? Here’s what you need to know

Posted on Dec 22, 2017

Giving on a yearly basis could trim both your estate and income taxes. First, there’s the annual exclusion for gifts. Currently, you can give $14,000 annually to any number of recipients without paying federal gift tax. Married couples can double this amount by gift-splitting – a gift of $28,000 from one spouse is treated as if it came half from each. Why giving is a two-way street Gifts do more than help out children who need the money. They also reduce your estate so your estate will pay less estate tax upon your death. Apart from annual gift giving, you can currently transfer (during your lifetime or through your estate) a total of $5.49 million with no estate or gift tax liability. On amounts above this threshold, you or your estate will be faced with taxes at the current top rate of 40 percent. So a consistent program of annual gift giving might create substantial tax savings. Note that gifts to individuals do not entitle you to an income tax deduction. A gift isn’t a charitable contribution. Conversely, a gift doesn’t constitute taxable income to the recipient. Gifts of income-producing property may, however, reduce your taxable income. Once you’ve given the property away, the recipient (not you) receives the income it produces and pays any income tax due on it. Giving can be easy One advantage to annual gift giving is that it is relatively simple to do, especially if you’re giving away cash. Another advantage is flexibility. You’re not locked into anything; you can see how much you can afford to give away each year. You can give away anything – cash, stock, art, real estate, etc. Valuation is the fair market value on the date of the gift. Subsequent appreciation, if any, belongs to the recipient’s estate (not yours). Before you give away assets, be sure you will not need them yourself to provide income in later years. Consider the impact inflation will have on your resources. Proper planning is essential in this area; get professional assistance before you do any gift giving. Contact our office if we can help. 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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