Back-to-school time means a tax break for teachers

When elementary and secondary school teachers are setting up their classrooms for the new school year, it’s common for them to pay for some classroom supplies out of pocket. A special tax break allows these educators to take an above-the-line deduction for up to $250 of these expenses. The deduction is especially important now due to the TCJA’s suspension of miscellaneous itemized deductions subject to the 2% of adjusted gross income floor, which before 2018 could be used for educator expenses. Contact us for details on the educator expense deduction.

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Keep it SIMPLE: A tax-advantaged retirement plan solution for small businesses

If your small business doesn’t have a retirement plan and has 100 or fewer employees, consider a SIMPLE IRA. Offering a retirement plan can provide your business with valuable tax deductions for its contributions and help attract and retain employees. As the name implies, a SIMPLE IRA is easy to set up and maintain. Eligible employees can defer up to $12,500 in 2018 (plus a catch-up of up to $3,000 for those age 50 or older). The deadline for setting one up for this year is Oct. 1, 2018. Contact us to learn more about SIMPLE IRAs and other retirement plan options.

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Play your tax cards right with gambling wins and losses

If you gamble, play your tax cards right with your wins and losses. Changes under the TCJA could have an impact. You must report 100% of your winnings as taxable income, but you might pay a lower rate on them because of TCJA rate reductions. Gambling losses are still allowed as an itemized deduction (up to your winnings for the year), but, with the standard deduction nearly doubled under the TCJA, you might no longer benefit from itemizing. Finally, “professional” gamblers face tighter limits on deducting their gambling expenses. Contact us if you have questions.

Read more: Play your tax cards right with gambling wins and losses

Keep it SIMPLE: A tax-advantaged retirement plan solution for small businesses

If your small business doesn’t have a retirement plan and has 100 or fewer employees, consider a SIMPLE IRA. Offering a retirement plan can provide your business with valuable tax deductions for its contributions and help attract and retain employees. As the name implies, a SIMPLE IRA is easy to set up and maintain. Eligible employees can defer up to $12,500 in 2018 (plus a catch-up of up to $3,000 for those age 50 or older). The deadline for setting one up for this year is Oct. 1, 2018. Contact us to learn more about SIMPLE IRAs and other retirement plan options.

Read more: Keep it SIMPLE: A tax-advantaged retirement plan solution for small businesses

Keep an eye out for extenders legislation

The pieces of tax legislation garnering the most attention these days are the Tax Cuts and Jobs Act signed into law last December and the possible “Tax Reform 2.0” that Congress might pass this fall. But what happens with “extenders” legislation is also important. It affects whether the above-the-line deduction for tuition and related expenses, the mortgage insurance premium deduction and the exclusion from gross income for mortgage loan forgiveness will be available for 2018. Contact us with questions about these breaks and whether you can benefit.

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Choosing the right accounting method for tax purposes

The Tax Cuts and Jobs Act (TCJA) liberalized the eligibility rules for using the cash method of accounting, making this method (which is simpler than the accrual method) available to more businesses. Now the IRS has provided procedures for obtaining automatic consent to change accounting method under the TCJA. If you’re eligible for both methods, consider whether switching would be beneficial. 

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The TCJA prohibits undoing 2018 Roth IRA conversions, but 2017 conversions are still eligible

Converting a traditional IRA to a Roth IRA can provide tax-free growth and tax-free withdrawals in retirement. But conversions are subject to income tax. Before the TCJA, if you discovered a conversion would be too costly tax-wise, you could undo it using a “recharacterization” and avoid the tax hit. Effective with 2018 conversions, the TCJA prohibits recharacterizations. If, however, you converted to a Roth IRA in 2017, you have until Oct. 15, 2018, to undo it. We can help you assess whether to recharacterize a 2017 conversion or execute a 2018 conversion.

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An FLP can save tax in a family business succession

A family limited partnership (FLP) can help you enjoy the tax benefits of transferring ownership in your business to the next generation yet allow you to retain control. The value of transferred interests is removed from your taxable estate. Discounts might reduce the value for tax purposes, and you can apply your $15,000 annual gift tax exclusion or $11.18 million lifetime gift tax exemption. There also may be income tax benefits. But to withstand IRS scrutiny, FLPs must, among other things, have a business purpose beyond tax savings. Contact us to learn more.

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Do you still need to worry about the AMT?

Do you still need to worry about the individual alternative minimum tax (AMT)? A repeal had been proposed, but it wasn’t included in the final version of the Tax Cuts and Jobs Act (TCJA). The act will, however, reduce the number of taxpayers subject to the AMT. Now is a good time to familiarize yourself with the changes and see if there are any steps you can take during the last several months of the year to avoid the AMT or at least minimize any negative consequences. To learn about the TCJA’s impact on the AMT and assessing your AMT risk for 2018, contact us.

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Business deductions for meal, vehicle and travel expenses

Some common deductions for businesses are meal (generally 50%), vehicle and travel expenses. Deductibility depends on a variety of factors, but proper documentation is one of the most critical. Following some simple steps can help ensure your deductions will pass muster with the IRS. First, keep receipts, canceled checks or similar documentation. Also, track the business purpose of each expense (and don’t wait until year end or an IRS audit). Finally, if you reimburse employees, require them to provide such documentation. Contact us for more information.

Read more: Business deductions for meal, vehicle and travel expenses

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