Weekly Tax Brief

Tax reform expands availability of cash accounting

Details: Published: 18 December 2018 18 December 2018

The cash method of accounting offers greater tax-planning flexibility, allowing some businesses to defer taxable income. Under the TCJA, if your business’s average gross receipts for the previous three tax years are $25 million or less, you generally will now be eligible for the cash method for federal tax purposes, regardless of how your business is structured, your industry or whether you have inventories. Newly eligible businesses should determine whether the cash method would be advantageous and, if so, consider switching methods. Contact us to learn more.

Consider all the tax consequences before making gifts to loved ones

Details: Published: 14 December 2018 14 December 2018

Many people choose to pass assets to the next generation during life, whether to reduce the size of their taxable estate, to help out family members or simply to see their loved ones enjoy the gifts. If you’re considering lifetime gifts, be aware that which assets you give can affect the tax consequences. For example, to minimize your heir’s income tax, gift property that hasn’t appreciated significantly while you’ve owned it. The heir can sell the property at a minimal income tax cost. Contact us to discuss the tax consequences of any gifts you’d like to make.

It’s not too late: You can still set up a retirement plan for 2018

Details: Published: 10 December 2018 10 December 2018

If most of your money is tied up in your business, retirement can be a challenge. So if you haven’t already set up a tax-advantaged retirement plan, consider doing so this year. There’s still time to set one up and make contributions that will be deductible on your 2018 tax return. And funds can grow tax deferred. If you have employees, they generally must be allowed to participate in the plan, provided they meet the requirements. But you might be eligible for a $500 tax credit for setting up the plan. Would you like to set up a plan this year? Contact us!

Buy business assets before year end to reduce your 2018 tax liability

Details: Published: 03 December 2018 03 December 2018

Investing in business assets is a traditional and powerful year-end tax planning strategy, and it might make even more sense in 2018. Sec. 179 expensing and bonus depreciation both allow an immediate deduction for the cost of eligible asset purchases, rather than depreciating them over a number of years. The TCJA increases potential deductions under these breaks and expands the assets that are eligible. To qualify, you must place assets in service by the end of the year. So there’s still time to make purchases and reduce your 2018 taxes. Contact us to learn more.

529 plans offer two tax-advantaged education funding options

Details: Published: 30 November 2018 30 November 2018

Section 529 plans are a popular education-funding tool because of tax and other benefits. Two types are available: 1) prepaid tuition plans, and 2) savings plans. A prepaid tuition plan guarantees tuition regardless of its cost when the child attends the school. A savings plan can fund expenses beyond college tuition on a tax-free basis. The TCJA expands the definition of qualified expenses to generally include elementary and secondary school tuition. However, tax-free distributions used for such tuition are limited to $10,000 per year. Contact us with questions.

Charitable IRA rollovers may be especially beneficial in 2018

Details: Published: 27 November 2018 27 November 2018

If you’re age 70 1/2 or older, you can make direct contributions (up to $100,000 annually) from your IRA to a qualified charity without owing any income tax on the distributions. While you might be able to achieve a similar result from taking the RMD, contributing that amount to charity and taking an itemized deduction for the donation, fewer taxpayers benefit from itemizing under the TCJA. Contact us for details.

Research credit available to some businesses for the first time

Details: Published: 19 November 2018 19 November 2018

The TCJA didn’t change the research credit, but it has an impact on the credit. Previously, corporations subject to alternative minimum tax (AMT) couldn’t offset the research credit against AMT liability, which erased the credit’s current benefits. By eliminating corporate AMT, the TCJA removed this obstacle. Pass-through businesses can still claim the credit against AMT if their average gross receipts are $50 million or less. And qualifying start-ups without taxable income can still claim the credit against up to $250,000 in payroll taxes. Contact us for details.

Selling your business? Defer — and possibly reduce — tax with an installment sale

Details: Published: 13 November 2018 13 November 2018

You’re ready to sell your business and want to get the return from it you’ve earned from the time and money you’ve invested. That means getting a good price and minimizing the tax hit on the proceeds. One option that can help defer tax is an installment sale. Spreading gain over several years is especially beneficial if it allows you to stay under the thresholds for triggering the 3.8% net investment income tax or the 20% long-term capital gains rate. But it’s not without tax risk. For help determining whether an installment sale is right for you, contact us.

Tax planning for investments gets more complicated

Details: Published: 09 November 2018 09 November 2018

For investors, fall is a good time to review year-to-date gains and losses. Doing so can help you determine whether to buy or sell investments before year end to save taxes. You also need to consider the TCJA. While it didn’t change long-term capital gains rates, it did change the tax brackets. For 2018 through 2025, these brackets are no longer linked to the ordinary-income tax brackets for individuals. So, for example, you could be subject to the top long-term capital gains rate even if you aren’t subject to the top ordinary-income rate. Questions? Contact us.

Now’s the time to review your business expenses

Details: Published: 05 November 2018 05 November 2018

As we approach the end of the year, it’s a good idea to review your business’s expenses for deductibility. At the same time, consider whether you’d benefit from accelerating certain expenses into this year. There’s no master list of deductible business expenses in the Internal Revenue Code (IRC). Some deductions are expressly authorized or excluded, but most are governed by the general rule of IRC Sec. 162, which permits businesses to deduct their “ordinary and necessary” expenses. Also, the TCJA reduces or eliminates many deductions. Contact us to learn more.

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