Understanding Capital Gains
A capital gain occurs when you sell an asset for more than your original purchase price (known as your basis). If you sell the asset for less than what you paid, you incur a capital loss. These losses can be used to offset gains and lower your overall tax bill.
LLC vs. S Corporation: Which Offers Greater Tax Savings?
Selecting the right business structure is crucial, as it can significantly impact your tax obligations. Below is a comparison of two popular choices for small business owners: LLCs and S Corporations.
Tax Deductions for Home-Based Businesses:
What You Can Claim
Running a business from home comes with several financial benefits—one of the biggest being the tax deductions available to reduce your taxable income. Whether you’re a sole proprietor, freelancer, or small business owner, understanding what deductions you can legally claim is essential for maximizing your tax savings.
The Kiddie Tax is a U.S. tax rule designed to prevent parents from shifting investment income to their children to take advantage of lower tax rates. Here’s a short summary:
What is the Kiddie Tax?
Avoid Estimated Tax Penalties with Strategic Withholding
Quarterly estimated tax payments for each tax year are due on April 15, June 15, September 15, and January 15 of the following year. Missing any of these deadlines can result in penalties imposed by the U.S. Treasury. Currently, the penalty rate for underpaying the first installment due April 15 is 7%. Since this penalty is not tax-deductible, the effective cost is actually higher. For example, taxpayers in the 37% tax bracket face an effective penalty rate of approximately 11.11%—which is 1.59 times greater than the stated 7%.
Business Use: 70 cents per mile
Medical & Moving (for active-duty military only): 21 cents per mile
Charitable Organizations: 14 cents per mile (statutory rate)
These rates apply to all types of vehicles, including electric, hybrid, gasoline, and diesel-powered cars, vans, pickups, and panel trucks.
Understanding Tax Deductions for Raw Land Investments
Investing in raw, unimproved land offers a lower-maintenance path into real estate, free from the obligations of managing tenants or structures. But tax treatment for raw land differs from that of developed property. Property taxes on investment land are deductible if you itemize, and unlike the $10,000 cap on personal property taxes, this limit does not apply to investment property. If you finance the purchase, the interest may also be deductible as an investment interest expense—limited to your net investment income, with unused amounts carried forward to future years.
Understanding the 2024 Child Tax Credit
In 2024, the Child Tax Credit (CTC) remains a crucial financial benefit for millions of American families. The current credit allows eligible taxpayers to claim up to $2,000 per qualifying child under age 17, with up to $1,600 potentially refundable through the Additional Child Tax Credit (ACTC). To qualify, the child must have a valid Social Security number, live with the taxpayer for more than half the year, and be claimed as a dependent. The credit phases out for higher-income earners, beginning at $200,000 for single filers and $400,000 for married couples filing jointly.
Major Changes to Simple IRAs in 2024
Short Summary: A SIMPLE IRA is a written plan, funded primarily by tax-deferred employee contributions and partially by employer contributions. Individual accounts are maintained for each employee, no actuarial or qualified plan rules apply, but most employees who have earned at least $5,000 in the current and 2 previous years qualify to participate. The employee may defer up to $16,000 ($17,600 in certain cases) for 2024. The employer generally matches the lesser of the employee’s deferred amount or 3% of the employee’s compensation ($16,000 max match). The plan must be established by October 1st of the year for which a deduction is desired, and the employer’s contribution may be made up to the due date of the return plus extension. All SIMPLE IRA plans must be maintained on a calendar year basis.
Did You Overfund a Section 529 Plan? Consider a Roth IRA Rollover
Section 529 college savings plans are a great way to help pay for a child’s or other family member’s college education.
Contributions are not federally tax-deductible (they are deductible in many states), but they grow federally tax-free and can be withdrawn tax-free to pay for higher education expenses (up to $10,000 can also be withdrawn tax-free to pay for K through 12 school tuition or to pay off school loans).
But what happens if you establish and fund a Section 529 college savings plan for a child, grandchild, or other family member and he or she doesn’t use all the money or decides not to go to college at all? What do you do with the money in an overfunded 529 plan?
Claiming the Home Office Deduction in 2024
As remote work continues to be a norm for many professionals, the Home Office Deduction remains a relevant tax benefit—though it’s limited in scope. For tax year 2024, the deduction is available only to self-employed individuals, independent contractors, and gig workers who use part of their home exclusively and regularly for business purposes. Employees who receive W-2 wages are not eligible for the deduction, even if they work remotely full time, due to changes under the 2017 Tax Cuts and Jobs Act.
Retroactive to 2024 Tax Deduction Ideas
Year-End Tax Planning Tips to Save You Money
As the year draws to a close, it’s a great opportunity to take steps that can help you save on taxes. Consider these smart financial moves before December 31st:
Tax Implications of Side Hustles and Gig Work
With the rise of the gig economy, more individuals are earning extra income through freelance work, rideshare driving, online sales, or other side hustles. While this additional income can be a great financial boost, it also comes with tax responsibilities. The IRS considers this self-employment income, which means it must be reported—even if you don’t receive a 1099 form.
2024 Energy-Efficient Home Tax Credits: Save on Taxes While Going Green
Homeowners looking to make energy-efficient upgrades in 2024 can benefit from a range of expanded federal tax credits thanks to the Inflation Reduction Act. The Energy Efficient Home Improvement Credit allows taxpayers to claim 30% of the cost of eligible upgrades—such as insulation, energy-efficient windows and doors, heat pumps, and electrical panel upgrades—up to a maximum of $1,200 per year. For heat pumps and certain other systems, the limit increases to $2,000 annually, making it more affordable to go green.
Health (FSA, HSA, HDHP)
Health FSA (Flexible Spending Account):
Tax Considerations After the Loss of a Loved One (2023)
If you lost a loved one in 2023, there are several important tax filings and estate rules to be aware of. Here’s a breakdown to help you navigate the process:
Estate Value and Estate Tax
The total fair market value (FMV) of all assets owned by the deceased must be calculated as of the date of death, before any deductions are applied.
Taxpayers who have qualifying children under the age 18 at the end of 2021 can now get the full credit if they have little or no income from a job, business, or other source. Prior to 2021, the credit was worth up to $2,000 per qualifying child, with refundable portion limited to $1,400 per child. It has been increased to as much as $3,000 per child ages 6 – 17 at the end of 2021, and $3,600 per child ages 5 and under at the end of 2021.
The maximum credit is available to taxpayers with a Modified AGI of:
From July 15 through December 2021, the IRS will advance 50% of the 2021 child tax credit in monthly payments to eligible taxpayers. The monthly payment will be estimated from their 2020 tax returns. The remaining amount will be claimed on their 2021 income tax return.
If you did not file a tax return during 2020 you can use this tool to report qualifying children for 2020 non-filers: https://www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool
Taxpayers may elect to opt-out from the monthly child tax credit payments to receive a large payment next year instead of seven smaller payments. This could be the case for families saving up for a big expense or those who have budgeted for that money to pay off outstanding debt. Also, your household circumstances or tax situation will change and don’t want to deal with having to update your information in the portal.
Taxpayers may opt-out use the Child Tax Credit Update Portal by July 1.
The Research & Development tax credit allows companies to claim a tax credit for qualifying research expenditures. If your company has invested in R&D, you may benefit from this tax credit.
The Arkansas Department of Finance and Administration has announced that effective March 15, 2021, all franchise taxes will go back to being paid to the Secretary of State. Franchise tax filing/payment through Arkansas Taxpayer Access Point (ATAP) who took on the role on January 1, 2021 no longer will be available beginning March 12, 2021 at 3:00 a.m. The Secretary of State will continue to be the first point of contact when starting a new business in Arkansas as well as any activity related to the organizational structure of an entity.
In a News Release, IRS has announced that tax season will start on Friday, February 12, 2021, when the tax agency will begin accepting and processing 2020 individual income tax year returns. It also provided additional filing season date information.
IRS said that the February 12 start date for individual tax return filers allows IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits.
In March 2020, the FFCRA (Families First Coronavirus Response Act) required employers with fewer than 500 employees to provide paid sick and family leave to employees affected by COVID-19 and provided affected employers with a corresponding employment tax credit.
The Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses in response to the COVID-19 Outbreak. The filing deadline for tax returns has been extended from April 15 to July 15, 2020. The IRS urges taxpayers who are owed a refund to file as quickly as possible. For those who can’t file by the July 15, 2020 deadline, the IRS reminds individual taxpayers that everyone is eligible to request an extension to file their return.
If you drive for work, you may pay attention when the IRS updates the standard mileage rate used to deduct business driving expenses. The rate rises most years, but it also falls occasionally. That’s because mileage rates follow gas prices.
On 12/20/17, both the House (in a 224–201 vote) and the Senate (in a 51–48 vote) passed H.R. 1—commonly referred to as the Tax Cuts and Jobs Act (TCJA). The bill will be sent to President Trump, who is expected to sign it into law. Hailed as the largest major tax reform in over three decades, the TCJA contains a whole host of tax provisions that impact individuals and businesses.
This is the time of year to think about “harvesting” (or selling) depreciated stocks to offset any stock gains and possibly reduce your 2017 tax bill. Just keep in mind that:
Are you one of the 63 million American adults who volunteers for charity? Although there’s no tax deduction for the value of your time, you may be able to deduct unreimbursed costs related to:
You walk the straight and narrow, follow the law, file your taxes. But maybe you know of someone who doesn’t…
The IRS wants to hear from you – and will pay for concrete information leading to the collection of unpaid taxes. Whistleblower awards typically range between 15% and 30% of the outstanding taxes, penalties and interest collected.
Looking for ways to minimize your company’s 2017 tax bill? Consider the domestic production activities deduction (DPAD). Often referred to as “manufacturer’s deduction,” the DPAD can also be claimed by many construction engineering, oil and mining, software and other business.
Survivors of Hurricanes Harvey, Irma and Maria ara tattered, but they’re also tough – and ready to rebuild. If you were affected by the storms (or another natural disaster), the casualty loss deduction can help. This tax break enables you to deduct the cost of damage to your home or personal property on your 2017 federal return.
Last month, a Massachussetts woman won the largest undivided Powerball jackpot. After she opted for a lump-sum payment, her prize of nearly $759 million shrunk to $480 million. But federal and state withholding took their toll as well – reducing her take-home amount to $336 million. She can expect to pay even more when she files her tax return.
This secure tool, available on IRS.gov allows taxpayers to view their IRS account balance, which will include the amount they owe for tax, penalties and interest. Taxpayers may also continue to take advantage of the various online payment options available by accessing any of the payment features including: direct pay, pay by card and Online Payment Agreement.
The new features added include the ability to:
One of the advantages of operating your own business is hiring family members. If you are self-employed, hiring your children to work for you can provide spending money for them and tax savings for you. But make sure you follow the guidelines.
The IRS estimates $1 Billion in refunds for unfiled 2013 tax returns. The IRS grants a 3 year window to file a tax return in order to receive a refund if you are owed one. It is very interesting that so many people have not filed their 2013 tax return. The IRS estimates the midpoint for potential refunds for 2013 at $763.
Although tax season doesn’t officially begin until next week, it is important to get ready and file as early as possible to avoid any unneeded stress by using these tips to prepare for the 2017 tax season now.
As we near the 4th quarter, small business owners and individuals should begin thinking ahead as the 2016 tax season is right around the corner.
The federal highway funding extension bill contains several tax provisions, including changing the due dates for partnership and corporate tax returns. Other changes affect mortgage interest statements, basis of inherited assets, and the six-year statute of limitation. Read more about it at http://www.journalofaccountancy.com/news/2015/jul/tax-return-due-dates-changed-201512746.html.
Earlier this month, the United States Department of Labor (DOL) published regulations that modified certain provisions of the Fair Labor Standards Act (FLSA). Specifically, the regulations increase the minimum salary for an employee to be exempt from FLSA overtime requirements. The following are some frequently asked questions regarding these changes.