Weekly Tax Brief

Take advantage of a “stepped-up basis” when you inherit property

Details: Published: 23 July 2020 23 July 2020

If you’re planning your estate, or you’ve inherited assets, you may be unsure of the “cost” (or “basis”) for tax purposes. Under the fair market value basis rules (also known as the “step-up and step-down” rules), an heir receives a basis in inherited property equal to its date-of-death value. For example, if your grandfather bought stock in 1935 for $500 and it’s worth $5 million at his death, the basis is stepped up to $5 million in the hands of your grandfather’s heirs — and all of that gain escapes federal income tax forever. A “step-down” occurs if someone dies owning property that has declined in value. Contact us for tax assistance when estate planning or after inheriting assets.

Conduct a “paycheck checkup” to make sure your withholding is adequate

Details: Published: 15 July 2020 15 July 2020

A big tax bill or a large refund may mean you don’t have the correct amount of tax withheld from your paycheck. Here’s how to avoid this next year.

Some people are required to return Economic Impact Payments that were sent erroneously

Details: Published: 09 July 2020 09 July 2020

Economic Impact Payments (EIPs) are being sent to eligible individuals in response to the financial impact caused by COVID-19. However, the IRS says some payments were sent erroneously and should be returned.

If you’re selling your home, don’t forget about taxes

Details: Published: 01 July 2020 01 July 2020

Traditionally, spring and summer are popular times for selling a home. Unfortunately, the COVID-19 crisis has resulted in a slowdown in sales. Still, many people are selling this year. If you’re one of them, it’s a good time to review the tax implications. Contact us with questions.

Rioting damage at your business? You may be able to claim casualty loss deductions

Details: Published: 12 June 2020 12 June 2020

The recent riots around the country have resulted in many storefronts, office buildings and business properties being destroyed. In the case of stores and businesses with inventory, looters stole products after ransacking property. A commercial insurance property policy should generally cover some, or all, of the losses. But a business may also be able to claim casualty property loss or theft deductions on its tax return. Contact us for more information about your situation.

Seniors: Can you deduct Medicare premiums?

Details: Published: 09 June 2020 09 June 2020

If you’re age 65 and older, and you have basic Medicare insurance, you may need to pay additional premiums to get the level of coverage you want. The premiums can be costly, especially if you’re married and both you and your spouse are paying them. But there may be a silver lining: You may qualify for a tax break for paying the premiums. However, it can be difficult to qualify to claim medical expenses on your tax return. For 2020, you can deduct medical expenses only if you itemize deductions and only to the extent that total qualifying expenses exceeded 7.5% of adjusted gross income. Contact us if you want more information about deducting medical expenses, including Medicare premiums.

Business meal deductions: The current rules amid proposed changes

Details: Published: 04 June 2020 04 June 2020

One tax break that President Trump has proposed to help restaurants and entertainment venues is an increase in business meal and entertainment deductions. We’ll let you know if a law passes that enhances deductions. In the meantime, let’s review the rules. Before the pandemic hit, many businesses spent money “wining and dining” customers, employees and others. Under current law, entertainment expe nses aren’t deductible. However, you can deduct 50% of the cost of business-related food and beverages, if you meet certain requirements. If you buy food and beverages at an entertainment event, you can deduct 50% of the cost, but only if business was conducted right before, during or afterwards.

Student loan interest: Can you deduct it on your tax return?

Details: Published: 02 June 2020 02 June 2020

Many taxpayers with student loans have been hard hit by the economic impact of COVID-19. The CARES Act contains some help. It allows borrowers with federal student loans to stop making monthly payments until Sept. 30, 2020. If you do make student loan payments, you may be able to deduct the interest on your tax return, depending on your income and subject to certain requirements. The maximum amount of student loan interest you can deduct each year is $2,500. For 2020, the deduction is phased out for married taxpayers filing jointly with adjusted gross income (AGI) between $140,000-$170,000 ($70,000-$85,000 for single filers). The deduction is unavailable for taxpayers with AGIs above that.

IRS releases 2021 amounts for Health Savings Accounts

Details: Published: 29 May 2020 29 May 2020

The IRS recently released the 2021 inflation-adjusted amounts for Health Savings Accounts (HSAs).

For calendar year 2021, the annual contribution limitation for an individual with self-only coverage under a HDHP is $3,600. For an individual with family coverage, the amount is $7,200. This is up from $3,550 and $7,100, respectively, for 2020. For calendar year 2021, an HDHP is a health plan with an annual deductible that isn’t less than $1,400 for self-only coverage or $2,800 for family coverage. In addition, annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) can’t exceed $7,000 for self-only coverage or $14,000 for family coverage.

Fortunate enough to get a PPP loan? Forgiven expenses aren’t deductible

Details: Published: 22 May 2020 22 May 2020

The IRS has issued guidance clarifying that certain deductions aren’t allowed if a business has received a Paycheck Protection Program (PPP) loan. Specifically, an expense isn’t deductible if both: 1) the payment of the expense results in forgiveness of a loan made under the PPP, and 2) the income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. IRS Notice 2020-32 states that “this treatment prevents a double tax benefit.” However, two members of Congress say they’re opposed to the IRS stand on this issue. They say they’ll seek legislation to make certain expenses deductible. Stay tuned.

More Articles ...