Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

Economic and tax considerations make right now a good time for parents (and grandparents) who are willing and able to help their adult children make home purchases. Some residential real estate markets are “hot” with homes selling for more than asking price. In other markets, the prices are recovering, but are still at lower levels than a few years ago. With mortgage interest rates at historically low levels, now may be a great time to buy a home. In addition, there are some favorable tax factors that will help. How long this good scenario will last is anyone’s guess, but we would bet not too much longer.

Beneficial Tax Factors

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

For anyone who spends a lot of time traveling by air for business purposes, one of the nice things that typically comes out of all of that travel is frequent flyer miles. Even better, about 14 years ago the IRS addressed the controversial question of what happens tax-wise if someone earns those miles (from air travel, rental cars, hotels, etc.) on trips paid for by their company, but uses them for personal purposes. Happily, the IRS said it wasn’t going to assert that someone has taxable income merely because they personally benefited from frequent flyer miles or other in-kind promotional benefits resulting from their business or official travel.

That all sounds good and seemed like the end of the matter—until a recent Tax Court decision said a taxpayer, who cashed in points to purchase a plane ticket, was taxed on the value of the ticket. What happened?

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

Year-end planning will be more challenging than normal this year. Unless Congress acts, a number of popular deductions and credits expired at the end of 2013 and won’t be available for 2014. Deductions not available this year include, for example, the election to deduct state and local sales taxes instead of state and local income taxes and the above-the-line deductions for tuition and educator expenses, generous bonus depreciation and expensing allowances for business property, and qualified charitable distributions that allow taxpayers over age 70¹/₂ to make tax-free transfers from their IRAs directly to charities. 

Of course, Congress could revive some or all the favorable tax rules that have expired as they have done in the past. However, which actions Congress will take remains to be seen and may well depend on the outcome of the elections. 

What we’ve listed below are a few money-saving ideas to get you started that you may want to put in action before the end of 2014: 

• If you or a family member own traditional IRAs and reached age 70¹/₂ this year, consider whether it’s better to take the first required minimum distribution in 2014 or by April 1 of next year.
• If your employer offers a flexible spending account arrangement for your out-of-pocket medical or child care expenses, make sure you’re maximizing the tax benefits during the upcoming enrollment period for 2015.
• If it looks like you are going to owe income taxes for 2014, consider bumping up the federal income taxes withheld from your paychecks now through the end of the year.
• Between now and year-end, review your securities portfolio for any losers that can be sold before year-end to offset gains you have already recognized this year or to get you to the $3,000 ($1,500 married filing separate) net capital loss that’s deductible each year.
• If you own any securities that are all but worthless with little hope of recovery, you might consider selling them before the end of the year so you can capitalize on the loss this year.
• If you are self-employed, consider employing your child. Doing so shifts income (which is not subject to the Kiddie tax) from you to your child, who normally is in a lower tax bracket or may avoid tax entirely due to the standard deduction. There can also be payroll tax savings and the ability to contribute to an IRA for the child.
• If you own an interest in a partnership or S corporation that you expect to generate a loss this year, you may want to make a capital contribution (or in the case of an S corporation, loan it additional funds) before year end to ensure you have sufficient basis to claim a full deduction.
• If you’re selling appreciated property and want to defer at least a portion of the tax liability, consider a like-kind exchange or installment sale.
• And finally, watch out for the Alternative Minimum Tax (AMT) in all of your planning because what may be a great move for regular tax purposes may create or increase an AMT problem.

 Again, these are just a few suggestions to get you thinking. If you’d like to know more about them or want to discuss other ideas, please feel free to call us. 

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

In our always-connected, always-on business environment, it isn’t unusual for employees to work from home on a regular basis. For the majority of individuals, this work occurs in the evenings, or on weekends or holidays, when they’re not otherwise expected to be in the office. However, for an increasing number of employees, they’re telecommuting all or almost all of the time. When they do show up in the office, it is frequently just for group meeting or other gatherings, not to put in a “regular” day’s work sitting in an office, cubicle, or other workspace.

It is employees in this later situation who may be interested in a recent Tax Court decision involving a telecommuting employee with large home office deductions. However, before we get to this case, let’s quickly review the general requirements for a deduction.

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

Who Needs Estate Planning? 

Why estate planning is so important, and not just for the rich.  

Provided by Gaurangkumar Patel  

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

As of Jan. 1, 2013, there is a 3.8% net investment income tax on some categories of passive investment income for individuals, trusts and estates that exceed certain income thresholds.  As a result, it is in your best interest to identify these income sources and adopt strategies to lower your modified adjusted gross income or your net investment income to avoid the surtax.   

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

Higher tax rates may have you thinking about allocating a portion of your investments to tax-exempts. After all, interest earned on tax-exempt investments not only escapes ordinary income tax rates that can be as high as 39.6%, but also the 3.8% Net Investment Tax (NIIT).

Of course there are lots of things to consider when making an investment, but when comparing taxable investments to tax-exempt investments one important factor is the after-tax return of the investment. Depending on your tax bracket and state tax consequences, the difference on the return between taxable and tax-exempt investments can be significant.

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

The ordinary federal income tax rates for 2014 will be the same as last year: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. For 2014, the top 39.6% rate affects taxpayers with taxable income above $406,750 for singles, $457,600 for married joint-filing couples, $432,200 for heads of households, and $228,800 for married individuals who file separate returns. Higher-income individuals can also be hit by the 0.9% Medicare tax and the 3.8% Net Investment Income Tax (NIIT), which can result in a higher-than-advertised federal tax rate for 2014.

Despite recent tax increases, the current federal income tax environment remains relatively favorable by historical standards. This letter presents some tax planning ideas to consider this summer while you have time to think. Some of the ideas may apply to you, some to family members, and others to your business.

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

IRS tax scams are on the rise. Therefore, it’s important to use caution when viewing emails and receiving telephone calls purportedly from the IRS. Falling victim to a tax scam can be very costly, not only in money, but also in the amount of time and aggravations it can take to straighten out the resulting mess.

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

Did you know that if you are trying to find work in your current occupation, the costs of your search, including expenses for preparing and sending resumes, employment agency fees and related travel expenses, should be deductible? 

The deductions aren’t available in all cases. For example, you’re not eligible to use them if you are seeking employment in a new field or if this will be your first job.  If it’s been a long time since you left your last job, your costs also may not qualify.  Don’t try to navigate the rules on your own. If you want to learn more about these deductions, or ask any questions about your tax situation, contact us today.

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

Raise your hand if you’ve ever daydreamed about chucking that nine-to-five (or seven-to-seven) day job for life on some remote–but wifi-enabled–island where you supplement your retirement funds with brilliant day trading. Of course, it’s just a fantasy for most of us, but the allure of regularly trading in and out of stocks or other securities for a living or simply to increase current income continues to attract people during good economic times and bad.

If this is something you’re doing, or considering, a couple of recent Tax Court cases could provide you with some helpful tips on how to go about it in a way that maximizes the tax advantages.

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

Are you making the most of tax benefits designed to offset some of the high costs of education? The American Taxpayer Relief Act of 2012, which settled the year-end fiscal cliff debate, extended the American Opportunity Tax Credit through 2017.The credit provides a tax break of up $2,500 for qualified college expenses. The Act also made permanent several education-related tax options, including a $2,000 maximum contribution amount for Coverdell education savings accounts, which can be used to pay certain elementary, secondary and post-secondary expenses. 

Given the many changes, we can help you make sense of the benefits available to you and ensure you’re taking full advantage of them. We can also offer advice on smart steps for financing the high cost of education, so please contact our office with all your questions. 

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

Do you work at home or have a home-based business? If so, you should be aware that the IRS has created a simpler option for calculating the deduction for the business use of your home. The new option makes recordkeeping easier because, instead of maintaining records of specific home office expenses, you can use a standard rate per square foot.  The rate is $5 per square foot (up to a maximum of 300 sq. feet or $1,500) for qualifying business use space in place of taking a pro rata percentage of items such as mortgage interest, taxes and repairs.

Keep in mind there are good and bad aspects to this “simpler” method.  The new method gives you back your full interest and tax deduction on schedule A, but you will lose your depreciation and loss carryover deductions. Of course, you must still use your home office regularly and exclusively for business. This may be a welcome relief for some taxpayers, but it might not be the best choice for others. Is it the right choice for you? Please contact us for answers to all your financial questions.

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

A set of tax rules known as the uniform capitalization (UNICAP) rules require certain business costs that are normally expensed as they’re incurred to instead be capitalized as part of the cost of inventory held for resale or noninventory items produced by a taxpayer for use in its own trade or business. Both real and tangible personal property are covered by these provisions.

The rules are far from new, having been around since the mid-80s. However, a recent Tax Court decision is a reminder that the rules can be a trap for the unwary. The taxpayer in the case was a homebuilder who capitalized the direct material and labor costs of constructing the homes, as well as post-completion carrying costs until the houses were sold. However, it failed to capitalize a whole host of generally indirect costs that the IRS and the Court found to be related to completing the homes (from front office salaries and overhead, to the cost of supervisors, designers, and decorators). The end result was the taxpayer faced a substantial additional tax bill.

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

If you’re counting on a federal income tax deduction for donating to a charity, you should confirm that the charity has been approved by the IRS as a tax-exempt organization eligible to receive deductible contributions. Here’s what you need to know, starting with the basics.

Charitable Contribution Deduction Basics

Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions.

After Congress passed and the President signed into law the American Taxpayer Relief Act of 2012 (ATRA), dramatic individual income tax increases went into effect in 2013. The ATRA shifted America from a two dimensional tax system to a five dimensional tax system. The advent of a five dimensional tax system makes 2013 year-end tax planning imperative. On top of the regular income taxes and the Alternative Minimum Tax (AMT), ATRA introduced higher tax brackets for high income taxpayers, limitations on personal exemptions and itemized deductions (PEP and Pease), and a new net investment income tax (NIIT). These increases include the following:  

• The highest income tax bracket on ordinary income and short-term capital gains increased from 35% in 2012 to 39.6% in 2013
• The highest income tax bracket on long-term capital gains increased from 15% to 20%  
• A new 3.8% net investment income tax (NIIT) went into effect for high income individuals
• When the NIIT is added to the top income tax brackets, the tax rates could be as high as 43.4% for ordinary income and short-term capital gains and 23.8% for long-term capital gains
• Taxpayers over the applicable threshold amount for PEP may have some or all of their personal exemptions phased out
• Taxpayers over the applicable threshold amount for Pease may have up to 80% of their itemized deductions phased out  

Tax planning is necessary not only to help your family minimize or avoid these new tax increases, but also to ensure that your expected tax liability estimates for 2013 and beyond are correct. This letter will suggest some ways to avoid or minimize the adverse effects of these changes in 2013 and later years. Planning for these tax changes is a major undertaking so you should start the process as soon as possible.