S corporation shareholders have an added reason to worry about their company’s annual performance: It has a direct impact on their own income taxes.
How It Works
Unlike a regular C corporation, an S corporation usually doesn’t pay federal income taxes itself. Instead, each shareholder is allocated a portion of the corporate income, loss, deductions, and credits on a special “K-1” tax form. The shareholder then must report the items listed on the K-1 on his or her personal tax return.
The K-1 allocations are based on stock ownership percentages. So, for example, if an S corporation has $100,000 of taxable business income for the year, a person who owns 75% of the stock in the corporation would be allocated 75% of that income, or $75,000.
This scheme can get complicated thats why we recommend the accountant Sydney services to help you in the process. Case in point: The K-1 may show more income than the shareholder actually received from the company during the year. That’s because the K-1 figure is based on the corporation’s actual taxable income — not on the distributions made to the shareholder.
Here’s an example: Tom starts a new corporation, electing S status. In the first year, Tom draws a $30,000 salary and receives no other distributions from the company. The company’s ordinary business income (after deducting his salary) is $10,000. Since Tom is the only shareholder, all the company’s $10,000 of income is allocated to him on his K-1. Tom must include both the $30,000 of salary and the $10,000 on his personal income tax return, even though all he actually received from the corporation was his salary.
This result seems harsh, but it’s not the end of the story. Special rules in the tax law prevent the same income from being taxed again. Essentially, Tom will be credited with already having paid taxes on the $10,000 so that any future distribution of the funds will not be taxable.
To determine whether non-dividend distributions are tax free, S corporation shareholders must keep track of their stock basis.* The computation generally starts with a shareholder’s initial capital contribution (or the stock’s cost if it was purchased) and changes from year to year as the shareholder is allocated corporate income, loss, etc. Non-dividend distributions that don’t exceed a shareholder’s stock basis are tax free.
Note that S corporation shareholders may be eligible to deduct up to 20% of their S corporation pass-through income. Eligibility depends on taxable income and other factors. S shareholders will want to consult their tax advisor to see if they can take advantage of the deduction to lower the taxes on their business income.
*Most distributions made from an S corporation are non-dividend distributions. Dividend distributions can occur if the company was previously a regular C corporation (or in other limited situations).
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).
The Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act) was signed into law on December 20, 2019. The Act will likely impact large numbers of working Americans as well as those already retired. In general, the Act is intended to increase access to tax-advantaged retirement plans and to help prevent older Americans from outliving their assets.
Here are some of the changes that could affect your planning.
Delayed Deadline for Taking Required Minimum Distributions
Tax law has generally required individual retirement account (IRA) owners and retirement plan participants to begin taking required minimum distributions (RMDs) from their accounts once they reach age 70½. The new law pushes back the age at which these distributions must begin to age 72 for IRA owners and plan participants born on or after July 1, 1949. This change allows individuals to take advantage of their retirement account’s tax-deferred nature for a longer period.
No Age Limit for Making Traditional IRA Contributions
Beginning with the 2020 tax year, the new law eliminates the 70½ age limit for making annual contributions to traditional IRAs. This is a plus for those people who continue to work past age 70½ and want to keep saving for retirement on a tax-deferred basis.
Penalty-Free Birth and Adoption Distributions
The new law also expands the exceptions to the 10% penalty for early withdrawals from IRAs and other tax-deferred retirement plans by adding an exception for “qualified birth or adoption distributions” up to $5,000. The new law defines a “qualified” birth or adoption distribution as a withdrawal from an IRA or other eligible retirement plan made during the one-year period beginning on the date the IRA owner’s or the plan participant’s child is born or the adoptee’s adoption is finalized. If desired, parents may replenish their retirement savings by repaying the amount distributed.
Restrictions on Stretch IRAs
The new law places severe restrictions on the use of “stretch” IRAs. A stretch IRA generally permitted beneficiaries to take their RMDs from an inherited IRA over their life expectancy. Thus, beneficiaries were able to stretch payments from the inherited IRA over many years and potentially pass on the inherited IRA to their own beneficiaries. The SECURE Act changes the RMD rules for beneficiaries of IRA owners (and plan participants) who passed away in 2020 or later. Under the SECURE Act, the use of stretch IRAs is restricted to a limited group of IRA beneficiaries. The specific details on who is eligible to use stretch IRAs is complex, and IRA owners who base their estate plans on the use of a stretch IRA should consult with a financial professional to see how they might be impacted.
Small Business Retirement Plans
Good news if you own a small business — the SECURE Act provides incentives to make it easier for you to establish a retirement plan. Starting in 2020, eligible employers that establish a 401(k) or SIMPLE IRA plan with automatic enrollment may qualify for a new tax credit of $500 per year for up to three years. In addition, the existing credit for small employer plan startup costs has increased to as much as $5,000 per year for three years. Previously, the annual credit maximum was $500. Employers also have more time to establish a qualified retirement plan. Previously, a qualified plan, such as a profit-sharing plan, had to be adopted by the last day of the employer’s tax year to be effective for that year. The SECURE Act allows a qualified plan to be adopted as late as the employer’s tax filing deadline (plus extensions).
Your financial and tax professionals can provide more details about these and other important SECURE Act changes and how they may affect your retirement planning.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).
The federal spending package that was enacted in the waning days of 2019 contains numerous provisions that will impact both businesses and individuals. In addition to repealing three health care taxes and making changes to retirement plan rules, the legislation extends several expired tax provisions. Here is an overview of several of the more important provisions in the Taxpayer Certainty and Disaster Relief Act of 2019.
Deduction for Mortgage Insurance Premiums
Before the Act, mortgage insurance premiums paid or accrued before January 1, 2018, were potentially deductible as qualified residence interest, subject to a phase-out based on the taxpayer’s adjusted gross income (AGI). The Act retroactively extends this treatment through 2020.
Reduction in Medical Expense Deduction Floor
For 2017 and 2018, taxpayers were able to claim an itemized deduction for unreimbursed medical expenses to the extent that such expenses were greater than 7.5% of AGI. The AGI threshold was scheduled to increase to 10% of AGI for 2019 and later tax years. Under the Act, the 7.5% of AGI threshold is extended through 2020.
Qualified Tuition and Related Expenses Deduction
The above-the-line deduction for qualified tuition and related expenses for higher education, which expired at the end of 2017, has been extended through 2020. The deduction is capped at $4,000 for a taxpayer whose modified AGI does not exceed $65,000 ($130,000 for those filing jointly) or $2,000 for a taxpayer whose modified AGI is not greater than $80,000 ($160,000 for joint filers). The deduction is not allowed with a modified AGI of more than $80,000 ($160,000 if you are a joint filer).
Credit for Energy-Efficient Home Improvements
The 10% credit for certain qualified energy improvements (windows, doors, roofs, skylights) to a principal residence has been extended through 2020, as have the credits for purchases of energy-efficient property (furnaces, boilers, biomass stoves, heat pumps, water heaters, central air conditions, and circulating fans), subject to a lifetime cap of $500.
Empowerment Zone Tax Incentives
Businesses and individual residents within economically depressed areas that are designated as “Empowerment Zones” are eligible for special tax incentives. Empowerment Zone designations, which expired on December 31, 2017, have been extended through December 31, 2020, under the new tax law.
Employer Tax Credit for Paid Family and Medical Leave
A provision in the tax code permits eligible employers to claim an elective general business credit based on eligible wages paid to qualified employees with respect to the family and medical leave. This credit has been extended through 2020.
Work Opportunity Tax Credit
Employers who hire individuals who belong to one or more of 10 targeted groups can receive an elective general business credit under the Work Opportunity Tax Credit program. The recent tax law extends this credit through 2020.
For details about these and other tax breaks included in the recent law, please consult your tax advisor.
Like many business owners, you may have structured your business as an S corporation because of the tax benefits it offers. An S corporation provides the same limited liability as a traditional C corporation, but it generally avoids the double taxation associated with a C corporation. You and the other shareholders (if any) pay income taxes on corporate income directly.
Once you have an S election in place, it’s important to make sure you avoid taking any action that would put the election in jeopardy. Your corporation’s failure to meet certain tax law requirements on an ongoing basis could result in the IRS’s termination of its S corporation status.
- Ownership. An S corporation generally may not have a corporate shareholder. (Exception: An S corporation may be wholly owned by another S corporation.) All shareholders generally must be individuals, estates, certain trusts, or tax-exempt 501(c)(3) charitable organizations. However, a partnership may hold S corporation stock as a nominee for an eligible shareholder. Nonresident aliens may not be shareholders.
- Number of shareholders. An S corporation may not have more than 100 shareholders. For purposes of this limit, a husband and wife are treated as one shareholder, as are certain other related individuals.
- Stock. An S corporation may have only one class of stock. Generally, a corporation is treated as having only one class of stock if all outstanding shares of the corporation’s stock confer identical rights to distribution and liquidation proceeds.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).
President Trump signed the Families First Coronavirus Response Act H.R. 6201into law on March 18, 2020. In the coming days and weeks, there will be additional bills that will expand, modify, and clarify H.R. 6201. The following Frequently Asked Questions surrounding H.R. 6201 was devised to help answer questions you may have. Updates will be posted as new information is made available.
FAQ – What businesses are affected by the new bill?
If you have fewer than 500 employees, then this bill covers your business
FAQ – When does this bill go int effect?
The bill was signed into law on March 18, 2020 and goes into effect 15 days later and will remain into effect until the end of 2020.
FAQ – Can I opt out of the new bill?
Companies with fewer than 50 employees will be allowed to opt out of the bill provisions if it would jeopardize the viability of the business.
Companies between 50 and 500 employees cannot opt out of the bill’s provisions.
FAQ – How can I opt out if the viability of my business would be affected by this bill?
The Secretary of Labor has the authority to exempt small businesses with fewer than 50 employees from the bill’s paid leave. The Department of Labor will establish guidelines and procedures on how small businesses will be able to apply for this exemption.
FAQ – I’m a healthcare provider. Can I exclude the leave provisions of this bill?
Exception for Health Care Providers and Emergency Responders. Employers who are health care providers or emergency responders may elect to exclude their employees from the public health emergency leave provisions of the bill.
FAQ – What paid leave can my employees claim?
- They have been exposed to coronavirus or exhibit symptoms
- They are recommended to quarantine by a healthcare provider and cannot work from home
- They need to care for a family member who has been exposed to coronavirus or exhibits symptoms of coronavirus
- They need to care for a child younger than 18 years old because their school or day care is closed, or their childcare provider is unavailable.
FAQ – How much paid leave can my employees claim?
Employees under the bill are entitled to 10 weeks of paid leave (a provision of the bill has any extension beyond 10 weeks to be granted only to parents taking care of children with shuttered schools and day care centers).
The first 14 days of leave: under the bill, the first 14 days in which an employee takes emergency leave may be unpaid. An employee may elect, or an employer may require the employee, to substitute any accrued paid vacation leave, personal leave, or sick leave for unpaid leave.
Paid Leave Rate for Subsequent Days:After 14 days of unpaid leave, an employer is required to provide paid leave at an amount not less than two-thirds of an employee’s regular rate of pay up to $200 per day or $10,000 in the aggregate.
The bill also addresses hourly employees whose schedules vary to the extent than an employer cannot determine the exact number of hours the employee would have worked. For those employees, the employee’s paid leave rate should equal the average number of hours that the employee was scheduled per day over the six-month period prior to the leave. If the employee did not work in the preceding six-month period, the paid leave rate should equal the “reasonable expectation” of the employee at the time of hiring with respect to the average number of hours per day that the employee would be scheduled to work.
The following are further details:
Paid Sick Time: Full-time employees are entitled to 80 hours of paid sick leave. Part-time employees are entitled to the number of hours that the employee works, on average, over a two-week period.
For hourly employees whose schedules vary, the employee’s paid leave rate should equal the average number of hours that the employee was scheduled per day over the six-month period prior to the leave. If the employee did not work in the preceding six-month period, the paid leave rate should equal the “reasonable expectation” of the employee at the time of hiring with respect to the average number of hours per day that the employee would be scheduled to work.
Once an employee’s coronavirus-related need for using the emergency paid sick leave ends, then the employer may terminate the paid sick time. Further, paid sick time provided under H.R. 6201 shall not carry over from one year to the next.
Paid Leave Rate: Employees who take paid sick leave because they are subject to a quarantine or isolation order, have been advised by a health care provider to self-quarantine, or are experiencing coronavirus symptoms and seeking medical diagnosis are entitled to be paid at their regular pay rate or at the federal, state or local minimum wage, whichever is greater. In these circumstances, the paid sick leave rate may not exceed $511 per day, or $5,110 in aggregate.
Employees who take paid sick leave to care for another individual or child or because they are experiencing another substantially similar illness (as specified by HHS) are entitled to be paid at two-thirds their regular rate. In these circumstances, the paid sick leave rate may not exceed $200 per day, or $2,000 in aggregate.
The bill requires the Secretary of Labor to issue guidelines to assist employers in calculating paid sick time within 15 days of the bill’s enactment.
FAQ – Can I discourage my employees from taking this leave?
Employers cannot discourage or prevent eligible employers from claiming paid sick leave. If they do, it could be considered discriminatory or an obstruction of their legal rights.
Employer Notice Requirement:Employers shall post and keep posted, in conspicuous places, notice of the emergency paid sick leave requirements made available under H.R. 6201. Within seven days of the enactment of the bill, the Secretary of Labor will provide a model notice for use by employers.
FAQ – Will my business get reimbursed
Employers initially pay for the sick leave and are reimbursed by the federal government within three months through refundable tax credits that count against employers’ payroll tax.
FAQ – How does the reimbursement work?
EMPLOYER TAX CREDITS
H.R. 6201 provides for employer tax credits to offset the costs associated with the paid public health emergency leave and sick leave required for employees under Divisions C and E of the bill.
Payroll Tax Credit: The bill provides a refundable tax credit worth 100 percent of qualified public health emergency leave wages (as provided by Division C) and qualified paid sick leave wages (as provided by Division E) paid by an employer for each calendar quarter through the end of 2020. The tax credit is allowed against the tax imposed under the employer portion of Social Security and Railroad Retirement payroll taxes.
Credit Amount: The bill allows employers to take tax credits for qualified public health emergency leave wages and qualified sick leave wages:
Credit Amount for Public Health Emergency Leave Wages. The amount of qualified public health leave wages taken into account for each employee is capped at $200 per day and $10,000 for all calendar quarters.
Credit Amount for Sick Leave Wages. In instances when an employee receives paid sick leave because they are subject to a quarantine or isolation order, have been advised by a health care provider to self-quarantine, or are experiencing coronavirus symptoms and seeking medical diagnosis, the amount of qualified sick leave wages taken into account for each employee is capped at $511 per day.
n instances when an employee receives paid sick leave because they are caring for another individual or child or because they are experiencing another substantially similar illness (as specified by HHS) the amount of qualified sick leave wages taken into account for each employee is capped at $200 per day.
In determining the total amount of an employer’s qualified sick leave wages paid for a calendar quarter, the total number of days that the employer can take into account with respect to a particular employee for that quarter may not exceed 10 days minus the number of days taken into account for that employee for all previous quarters.
Credit for Health Plan Expenses. Under the bill, the public health emergency leave and paid sick leave credits would be increased to include amounts employers pay for the employee’s health plan coverage while they are on leave. Specifically, the bill allows for the credit amounts to be increased by the amount of the employer’s group health plan expenses that are “properly allocated” to the qualified emergency leave and sick leave wages. Health plan expenses are “properly allocated” to qualified wages if made on a pro rata basis (among covered employees and periods of coverage).
FAQ – If an employee goes on leave, then what happens when they come back to work?
Generally, eligible employees who take emergency paid leave are entitled to be restored to the position they held when the leave commenced or to obtain an equivalent position with their employer. H.R. 6201 limits this rule for employers with fewer than 25 employees. In such circumstances, if an employee takes emergency leave, then the employer does not need to return the employee to their position if:
- The position does not exist due to changes in the employer’s economic or operating condition that affect employment and were caused by the coronavirus emergency;
- The employer makes “reasonable efforts” to restore the employee to an equivalent position; and
- If these efforts fail, the employer makes an additional reasonable effort to contact the employee if an equivalent position becomes available. The “contact period” is the one-year window beginning on the earlier of (a) the date on which the employee no longer needs to take leave to care for the child or (b) 12 weeks after the employee’s paid leave commences.
Refundability of Excess Credit: The amount of the paid sick leave credit that is allowed for any calendar quarter cannot exceed the total employer payroll tax obligations on all wages for all employees. If the amount of the credit that would otherwise be allowed is so limited, the amount of the limitation is refundable to the employer.
Limitation on Tax Credits:Employers may not receive the tax credit if they are also receiving a credit for paid family and medical leave under the 2017 Tax Cuts and Jobs Act (P.L. 115-97). Employers would instead have to include the credit in their gross income.
FAQ – My business was shut down and I had to layoff my employees. Are they eligible for unemployment?
Unemployment Insurance: The bill provides for the Secretary of Labor to make emergency administration grants to states in the Unemployment Trust Fund. States are directed to demonstrate steps toward easing eligibility requirements and expand access to unemployment compensation for claimants directly impacted by COVID-19. The legislation also appropriates funds for states that aim to establish work-sharing programs that permit employers to reduce employee hours rather than laying them off. Under such programs, employees would receive partial unemployment benefits to offset the wage loss.
FAQ – Will this bill change?
Many new bills are being worked on that can and likely will make changes to this bill and/or clarify many of it’s provisions.
Do you know where your company’s data is? Without strong security controls in place, your data could be anywhere — and you could be dealing with a privacy breach. As technology grows more complex and the flow of information accelerates, opportunities for the misuse and abuse of data are bound to increase.
Flow Chart of Data
It’s imperative that you know exactly what data your staffing offices collects. Pay particular attention to the personally identifiable information (PII) you have for both customers and employees. Create a detailed flow chart showing what information is gathered, how it is captured, how it is used, where it is stored, how it is shared, and how it is ultimately disposed of.
Risk and Regulations
An effective data management plan helps ensure compliance and manage risk by establishing policies and procedures that control the flow and use of information. In addition to federal privacy legislation, the vast majority of states have laws to prevent security breaches, and some industries have developed their own privacy guidelines. Note that each phase of the information “life cycle” may require a unique set of controls.
Privacy policies are the “public” face of your data management plan. Best practices include:
- Notify customers about your privacy policies. Explain why information is collected, how it is used, why it is retained, and why it is disclosed (if it is).
- Obtain customers’ consent to use the information as outlined in your policies.
- Collect only the information you need and only for the purposes outlined.
- Keep personal information secure.
- Allow customers to review and update their PII.
- Do not retain the information any longer than needed to fulfill your stated purpose or as required (by law or regulation).
- If you disclose information to a third party, do so only with the consent and only for the purposes outlined.
- Monitor your compliance efforts on an ongoing basis.
For more tips on how to keep business best practices front and center for your company, give us a call today. We can’t wait to hear from you.
Assessing finance charges is a complicated process. But if you have a lot of late payments coming in, you may want to consider getting accounting services and talking to a professional.
There are many reasons why your customers send in payments past their due dates. Maybe they missed or misplaced your invoice, or they’re disputing the charges. They might not be very conscientious about bill-paying. Or they simply don’t have the money.
Sometimes they contact you about their oversight, but more often, you just see the overdue days pile up in your reports.
You could use stronger language in your customer messages. Send statements. Make phone calls if the delinquency goes on too long. Or you could start assessing finance charges to invoices that go unpaid past the due date. QuickBooks provides tools to accommodate this, but you’ll want to make absolutely sure you’re using them correctly – or you’ll risk angering customers and creating problems with your accounts receivable.
Setting the Rules
Before you can start, you’ll need to tell QuickBooks how you’d like your finance charges to work. It’s at this stage that we recommend you let us work with you. There’s nothing overly difficult about understanding finance charges in theory: you apply a percentage of the dollar amount that’s overdue to come up with a new total balance. But setting up your QuickBooks file with the finance charge rules you want to incorporate may require some assistance. If it’s done incorrectly, you will hear from your customers.
Here’s how it works. Open the Edit menu and select Preferences, then Finance Charge | Company Preferences.
Figure 1: Before you can start adding finance charges to overdue invoices, you’ll need to establish your company preferences.
What Annual Interest Rate percentage do you want to tack onto late payments? This is an issue we can discuss with you. Too low, and it’s not worth your extra time and trouble. To, high, and your customers may stop patronizing your business. And do you want to set a Minimum Finance Charge? Will you allow a Grace Period? If so, how many days?
You’ll need to assign an account to the funds that come in from interest charges. This needs to be an income account. In our example, it’s Other Income.
The next decision, whether to Assess finance charges on overdue finance charges, needs consideration – and some research. This may not be an option depending on the lending laws in the jurisdiction where your business is located. So again, if you want to charge interest on unpaid and tardy finance charges themselves, let’s talk. You can learn about heiken ashi day trading that captures and tells us about the pace of price. During trending markets, this indicator is handy and gives insight into trends and momentum.
When do you want the finance charge “countdown” to begin? When QuickBooks identifies a transaction that has not been paid within the stated terms, do you want the added charge to be applied based on the due date or the invoice/billed date?
Note: If your business sends statements rather than invoices, leave the Mark finance charge invoices “To be printed” box at the bottom of this window unchecked.
Applying the Rules
QuickBooks does not automatically add finance charges to your customers’ invoices. You’ll need to administer these additions yourself, though QuickBooks will handle the actual calculations. Open the Customers menu and select Assess Finance Charges to open this window:
Figure 2: You’ll determine who should have finance charge invoices created in the Assess Finance Charges window.
Make very sure that the Assessment Date is correct, as it has impact on QuickBooks’ calculations. Being even a day off makes a difference. Select the customers who should have finance charges applied by clicking next to their names in the Assess column. QuickBooks will display the Overdue Balance from the original invoice, as well as the Finance Charge it has calculated.
- If you choose not to apply finances charges to a customer because he or she has provided a good reason for the late payment, be sure the box in the Assess column is unchecked.
- If you want to change the finance charge due for a valid reason, you can type over the amount in the last column. This would be a rare occurrence and should be exercised only after consulting with us.
Important: If there is an asterisk next to a customer’s name, there are payments or credit memos that have not yet been applied to any invoice.
When everything is correct, click the Assess Charges button at the bottom. QuickBooks will create separate invoices for finance charges for each customer who owes them.
We can’t stress enough the importance of consulting with us before you start to work with finance charges enough. Keep your company file accurate and your customers happy by getting this complex accounting element right from the start.
If you are one of the millions of Americans who own your own home, you should be thinking about how President Trump’s latest tax bill helps or dents your finances; particularly when it comes to the ever-popular mortgage interest deductions. This article should put you ahead of the subject. If you need help organizing your taxes then get help from a tax preparation consulting service. When you’re serious about taking your origination business to the next level, having a partner that treats your business the way that you would is the only thing that matters. Go through this MortgageRight website for more details about the best mortgage branch opportunity which explode your income. We have redefined what a mortgage branching platform can be by giving you the lowest pricing on the market AND (not instead of) the best concierge service in the industry.
First off, if you are a homeowner with no intentions of changing anything soon, your mortgage deductions are unaffected (with a couple of exceptions we deal with below). If you want to learn more from the experts we recommend looking at a company that can handle a mortgage note.
The new laws apply only to those buying a home after 15th December 2017. If you fall into this category it boils down to understanding 3 key items:
- There’s a cap of $750,000 (previously $1 million) on your total mortgage value (covering private and secondary homes in aggregate) that qualifies for interest deduction.
- Discussing interest rate deduction on new home purchase goes hand-in-hand with the cap placed on Property Tax Deduction – now set at $10,000 (previously unlimited).
- The Standard Deduction has been nearly doubled for all categories of tax filers in 2018 onward, here is a guide to tax levies for more assistance.
Logically, anyone who intends buying in expensive locations or/and locations with property taxes above $10,000 should stop to think about it:
- High property prices of course generally call for higher mortgage financing, And it often happens that premium locations are also the ones with the highest real estate taxes – a double whammy effect if you will.
- In situations like this, it seems that the traditional enthusiasm around interest rate deductions may become somewhat jaded. It gives a whole new meaning to the popular realtor’s mantra, “location, location, location!”
The one escape hatch is to simply forget about itemizing interest payment and property tax claims; go to the expanded Standard Deduction now provided, If you are thinking on applying we certainly recommend you this calculator www.moreirateam.com/mortgage-calculator/ provided by the best team. But then again, the apparently increased relief offered by this new provision should be viewed alongside the knowledge that individual personal exemptions have been removed – which brings family size into the equation. If you have a lot of dependents (e.g. children or elderly parents) you may find yourself after all is said and done unchanged – or worse still, going backward.
Here’s another curveball that throws the cat amongst the pigeons: irrespective of when you bought or intend to buy your home/ homes (i.e. before or after the December 2017 law, it’s all the same) interest on second mortgages and on mortgages attached to unrented vacation residences is no longer deductible. Period. Given this, and all the other considerations are drawn into the conversation (as outlined above), it is impossible to provide a quick “catch-all” solution on interest rate deductibility. Finding the average closing costs in ga is essential when you are looking for properties. We can say this, however:
- It is likely there’ll be a homebuyer movement away from expensive property purchases for the foreseeable future, resulting in a growing tendency to relocate to tax-friendlier regions.
- The upper-middle class homebuyers will need to analyze these new tax provisions with a fine toothcomb, and even consider renting out vacation homes for part of the year to bring interest rate deduction back into the equation.
- Those buying at home prices under the $750,000 cap limit with under-$10,000 property tax limits should have a far easier passage.
Conclusion: It’s at times like this that astute tax advice paves the way forward and dispels doubt. If you are having some tax debt issues make sure you contact a tax debt relief services agency before you get anything else started. As you can see there are numerous considerations, especially for larger families and those fortunate enough to own more than one home, we know there are times where you can straggle with the mortgage payments so check this mortgage refinancing option. Also, those on the cusp of relocating should be looking at all the variables as well as state taxes before making the move. Our team is geared to answer your questions on every aspect of real estate related deductions. Contacting us sooner than later may be the wisest decision you can make this year.
Do you invest in mutual funds? Unless you hold your investment in a tax-deferred account, you’ll want to consider taxes when you look at a fund’s returns. After all, it’s not what your fund earns but what you keep that counts.
Distributions of Fund Income
Mutual funds are required to distribute almost all of their income — including realized capital gains, dividends, and interest
— to their shareholders each year. The tax bite from these distributions reduces the fund’s total return to the investor.
Capital gains. The tax rate on long-term capital gains is capped at 15% for most taxpayers, and 20% for those with higher incomes. However, if a fund sells a security at a gain before meeting the more-than-one-year holding period for long-term capital gain treatment, the gain is considered short term and is taxable to you when distributed at your regular tax rate.
Regular individual tax rates currently range as high as 37%.
Dividends. The tax rates on qualifying dividends mirror the long-term capital gains rates. These rates apply to qualifying dividends a mutual fund receives on stocks in its portfolio and distributes to shareholders. Dividends that don’t qualify for a favorable rate are taxable to you at your regular tax rate.
Interest. Distributions of interest a fund earns on bonds, certificates of deposit, and other interest-bearing investments are generally taxable to you at your regular tax rate. However, interest you receive from a municipal bond fund is generally exempt from federal income taxes (and possibly state taxes as well).
Note that a 3.8% surtax on net investment income may also apply to your capital gains, dividends, and interest from mutual fund investments if your income exceeds a tax law threshold. And you must pay taxes on taxable fund distributions whether or not you reinvest the distributions in additional shares of the fund.
Sales of Fund Shares
When you sell shares in a mutual fund, you’ll typically have a gain or loss to report on your tax return. If the securities in the
fund’s portfolio have gone up in value during the period the fund has owned them, this appreciation is reflected in the share price. Similarly, if the value of the fund’s holdings has dropped, the share price will reflect the loss in value.
Your gain or loss on a sale of fund shares is figured by comparing the amount you realize on the sale to your cost basis in
the shares you sold. If you sell all the shares you own, figuring your taxes is easy. You just add up all the investments you’ve
made, including reinvested dividends and other distributions, and compare that amount to the net sale proceeds to determine whether you have a gain or loss. However, if you don’t sell all your shares at once, you must use an IRS-approved method for figuring your cost basis.
Taxes can have a significant effect on your mutual fund returns. Be sure to consider them in evaluating your investments.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v
You sold one of your stock investments at a profit, so now you’ll have to report a capital gain on this year’s income tax return. Since another stock you own has been losing ground lately, you’re thinking of selling it to claim a capital loss on your return to offset your gain.
However, because you believe the company will bounce back eventually, you’re reluctant to part with your stock for the proven best forex indicators blog. What would happen if you sold your stock to claim the loss and then bought it back again right away?
At first glance, it might appear to be the perfect plan. But it won’t work because of the tax law’s wash-sale rules. These rules prevent you from claiming a capital loss on a securities sale if you buy “substantially identical” securities within 30 days before or after the sale. If you want to claim the loss, you’ll have to wait more than 30 days to repurchase stock in the company.
Gone for Good?
Wondering what happens to wash-sale losses you can’t deduct? They don’t just disappear from your tax calculations. Instead, you’re allowed to add the losses to the cost basis of the shares you reacquire. This increase in cost basis will mean a smaller capital gain (or a larger loss) when you eventually sell your shares.
Keep track of any share purchases you make through a stock dividend reinvestment plan or by having mutual fund distributions automatically reinvested. Selling shares of the same stock or mutual fund at a loss within 30 days of the automatic purchase (before or after) will trigger the wash-sale rules, and part of your loss will be disallowed. We recommend to check out this review of Cryptohopper which explains how to use the platform properly.
Is There a Plan B?
Is there any way you can take your tax loss and still maintain your position in the stock? You may be able to double up on the loss securities, then wait 30 days and sell your original securities at a loss. Be sure to consult your tax advisor before taking this, or any, action.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v