Individual Tax Insights

Estimated Tax Penalty Revisited

The United States has a “pay as you go” tax system in which payments for income tax (and, where applicable, Social Security and Medicare taxes) must be made to the IRS throughout the year as income is earned, whether through withholding, by making estimated ... (continued)

The Dreaded NIIT Tax & How to Avoid

NIIT Overview The NIIT is a 3.8 percent tax that applies if your modified adjusted gross income (MAGI) exceeds $200,000 (single filers), $250,000 (married, filing jointly), or $125,000 (married, filing separately). It targets the lesser of your net investment income or the amount your MAGI ... (continued)

Tax Free Rental Income-Must Read!!

The Augusta rule gets its name from the Masters Golf Tournament, where some members and others who live in the area receive tax-free rent by renting their homes for a week or two. You don’t have to live in Augusta to benefit from this ... (continued)

Understanding "Kiddie Tax"

I wanted to take this opportunity to touch base regarding the federal income tax rules on the “kiddie tax” and its potential impact on your financial strategy for your child(ren). In brief, the kiddie tax was enacted by Congress to prevent parents from passing investment ... (continued)

Estate Planning for the Rest of Us

You need an estate plan, regardless of whether or not you are among the ultra-rich. As recent news has shown, even those who have won the lottery or have substantial wealth can fall victim to poor estate planning. While federal estate taxes may not concern ... (continued)

Electric Vehicle Tax Credit Update

The IRS recently issued new guidance on electric vehicles. There are four ways you can potentially benefit from a federal tax credit for an EV you place in service in 2023 or later: Purchase an EV, and claim the ... (continued)

Rollover Your IRA to a Health Savings Account (HSA)-YES!!

Health Savings Accounts (HSAs) are designed for use alongside high-deductible health plans, assisting you in covering your medical expenses. They can also function as an incredible retirement account due to their triple tax benefit: You can deduct contributions from ... (continued)

Business vs Non-Business Bad Debts-Huge Tax Difference

The current economic climate makes this a good time to focus on bad debt losses. As an individual taxpayer, deducting bad debt losses has always been controversial with the IRS. To claim the deduction, you must first establish that the loss was from a bona ... (continued)

Another Potential Tax Free Benefit for Hiring Your Children

If your children work in your business, consider giving them education fringe benefits. Doing this right creates: tax deductions for the business, and tax-free fringe education benefits for the child. You can accomplish this without ... (continued)

What are NFT's & Tax Consequesnces

Did you buy, sell, donate, or receive an NFT during the tax year? If so, you must answer “yes” to the digital assets question on page one of the IRS Form 1040. Additionally, if you have sold an NFT, you could be liable for ... (continued)

Update on Cancellation Of Debt

Sometimes debts can pile up beyond a borrower’s ability to repay, especially if we are heading into a recession. But lenders are sometimes willing to cancel (forgive) debts that are owed by financially challenged borrowers. While a debt cancellation can help a beleaguered borrower ... (continued)

$80 Billion To The IRS-What Does it Mean to You

You may have noticed that the IRS is in a bad way. It has a backlog of millions of unprocessed paper tax returns, and taxpayers can’t get through to the agency on the phone. Congress noticed and took action by passing a massive funding ... (continued)

Electric Vehicle New Tax Laws-Maybe Be Best To Buy Before 12/31/22?

There’s good and bad news if you’re in the market for an electric or plug-in hybrid electric vehicle. The good news is that the newly enacted Inflation Reduction Act includes a wholly revamped tax credit for electric vehicles that starts in 2023 and continues ... (continued)

Energy Saving Tax Credits Under New Tax Law!!

The President signed the Inflation Reduction Act into law on August 16, 2022. It contains some valuable tax credits for homeowners. When it comes to taxes, nothing is better than a tax credit since it is a dollar-for-dollar reduction in the taxes you must ... (continued)

Beat the TAXMAN with These 11 Tax-Free Income Sources!

I was perusing the Internal Revenue Code (it’s one of the things I do) and started to think about the various sources of tax-free income. Here are the 11 that jumped out at me: Roth IRAs Social Security benefits ... (continued)

Defer Taxes With This Tax Strategy-Installment Sale

Do you own investment property? What about a small business? Sooner or later, you will probably want to sell. One of the downsides of selling a business or investment property is the huge tax bill at the end. Profits are likely subject to the ... (continued)

Here's How to defeat $10,000 SALT Cap

Maybe the least popular change brought about by the Tax Cuts and Jobs Act (TCJA) was a first-ever cap on the federal personal income tax deduction for state and local taxes. From 2018 through 2025, the TCJA caps itemized deductions for state income taxes ... (continued)

Non-Working Spousal IRA's-What You Need to Know

You may have joined the Great Resignation, maybe temporarily or maybe for good. Or your non-working status might have nothing to do with the Great Resignation. For instance, you could be a stay-at-home parent. In any case, as a spouse with no tax-defined earned ... (continued)

Deducting Mortgage Interest When Your Name is NOT on Deed

Tax law has an amazing break for unconventional homeowners. You can deduct your mortgage interest payments even when the deed to the house and the mortgage are in someone else’s name. Here’s what happened to Sue Davis. Sue could not personally qualify for a home loan. Her ... (continued)

Selling Your Vacation Home? Here's the Tax Consequences

The tax-code-defined vacation home rules come into play when you have both rental and personal use of a home. Thus, you can have tax-code-defined vacation homes in the city, in the suburbs, and in recreation areas. If you have no combined rental and personal use ... (continued)

Now May Be the Time to Transfer Your Residence to Your Children

With today’s home prices and the crazy real estate market, it’s likely difficult for your children to buy a home. And it’s conceivable that you are ready to move on from your existing home. If this is true, consider the three options below. Option 1: ... (continued)

Deducting Mortgage Interest When Your Name is NOT on Deed

Tax law has an amazing break for unconventional homeowners. You can deduct your mortgage interest payments even when the deed to the house and the mortgage are in someone else’s name. Here’s what happened to Sue Davis. Sue could not personally qualify for a home loan. Her ... (continued)

How to Avoid the Self-Rental Trap

Let’s say you own the building. Now, let’s say that you rent this building to your business. With no tax planning, you have a self-rental, and that makes rental income from this building nonpassive, meaning that it cannot offset any ... (continued)

Precious Metals--Tax Implications!

These days, some IRA owners and investors may be worried about being overexposed to equities. That could be you. But the safest fixed income investments (CDs, Treasuries, and money-market funds) are still paying microscopic interest rates. For example, when this was written, the 10-year Treasury ... (continued)

Is Your Sideline Business Really a Hobby?

Do you have a sideline activity that you think of as a business? From this sideline activity, are you claiming tax losses on your Form 1040? Will the IRS consider your sideline a business and allow your loss deductions? The IRS likes to claim that money-losing ... (continued)

Personal & Rental Use of Your Vacation Home-Know This!

When you use a home for both rental and personal use, regardless of that home’s location at the beach or in the city, you run into the tax code’s vacation home rules that make that home either a residence or a rental property. It’s ... (continued)

Facts You Should Know About the Third Economic Impact Payment For Your 2021 Tax Filing

The third round of Economic Impact Payments was authorized by the American Rescue Plan Act of 2021 as an advance payment of the tax year 2021 Recovery Rebate Credit.The IRS started sending the third Economic Impact Payments to eligible individuals in March 2021 and ... (continued)

Child Tax Credit for 2021-This is HUGE!!

For the 2021 tax year only, the American Rescue Plan Act of 2021 (ARPA) makes big, taxpayer-friendly changes to the federal income tax child tax credit (CTC). Here’s what you need to know, starting with some necessary background information. CTC Basics For 2018-2020 and 2022-2025, the ... (continued)

Analysis-Catch-Up Contribution to Your Retirement Plan?

After reaching age 50, you can make additional “catch-up” contributions to certain types of tax-advantaged retirement accounts. For the 2021 tax year, this opportunity is available if you’ll be age 50 or older on Friday, December 31, 2021. Specifically, with an employer-sponsored 401(k), 403(b), 457, ... (continued)

Little Known Law Can Reduce the Excludable Gain on Your Residence

Once upon a time, you could convert a rental property or vacation home into your principal residence, occupy it for at least two years, sell it, and take full advantage of the home sale gain exclusion privilege of $250,000 for unmarried individuals or $500,000 ... (continued)

Roth IRA After TCJA- The Backdoor is Still Open

As you likely know, the Roth IRA is a terrific way to grow your wealth with a minimum tax downside because you pay the taxes up front and then, with the proper holding period, pay no taxes after that. But if you earn too much, ... (continued)

Stock Portfolio Year End Tax Strategies

When you take advantage of the tax code’s offset game, your stock market portfolio can represent a little gold mine of opportunities to reduce your 2021 income taxes. The tax code contains the basic rules for this game, and once you know the rules, ... (continued)

529 Withdrawals-What You Need to Know!

The big advantage of 529 plans is that qualified withdrawals are always federal-income-tax-free—and usually state-income-tax-free too. What you may not know is that not all 529 withdrawals are tax-free qualified withdrawals, even in years when you have heavy college costs. Here are six important points ... (continued)

How Are Roth IRA Withdrawals Taxed

Some withdrawals are taxable. Even worse, some can be socked with a 10 percent early withdrawal penalty tax, and this can happen even when there’s no income tax hit. Any withdrawals from any of your Roth accounts are federal-income-tax-free qualified withdrawals if you, as ... (continued)

The New Tax Bill-What to Watch

Work in Congress on the new tax bill is progressing. The Ways & Means Committee of the House of Representatives has unveiled a detailed proposal to raise taxes by more than 2 Trillion to pay for proposed spending bills that are under negotiation. The ... (continued)

NUA- A Tax Strategy to Consider if You Own Company Stock

Do you own any of your employer’s company stock inside your employer’s 401(k), ESOP, profit sharing plan, or other retirement plan? Has it gone up in value since you got it? If so, you should start thinking about what to do with the stock ... (continued)

More on Tax Audits

As a business owner, you are in partnership with the IRS, like it or not. You share your net profits with the IRS according to your partnership agreement (known to you as the Internal Revenue Code). To make sure you are sharing fairly, the IRS can ... (continued)

Sale Of Principal Residence-New Rules!!

Here’s good news. IRS regulations allow you to claim a prorated (reduced) gain exclusion—a percentage of the $250,000 or $500,000 exclusion in select circumstances. The prorated gain exclusion equals the full $250,000 or $500,000 figure (whichever would otherwise apply) multiplied by a fraction. The numerator ... (continued)

Another Sad Story For Not Filing Tax Returns

Here’s a sad story of a dentist who did not file his tax returns. Of course, as you know, the failure to file tax returns often gets the IRS’s attention. In this case, it did, and this dentist suffered accordingly. The IRS used the 1099s ... (continued)

Real Estate Rental Losses-You MUST Have The Proof

If you own rental properties that can provide you tax shelter with their losses and your Form 1040 adjusted gross income is less than $150,000 (without considering rental losses), you need to overcome the tax code passive loss rules. Here are some important points. Keep a ... (continued)

Crytocurrency Taxable Transactions-Beware!

Here’s something to know about cryptocurrencies. Because cryptocurrencies are classified as “property” rather than as securities, the wash-sale rule does not apply if you sell a cryptocurrency holding for a loss and acquire the same cryptocurrency before or after the loss sale. You just have ... (continued)

Three REAL Problems + Costs From Filing Your Taxes Late

Three bad things happen when you file your tax return late. What’s Late? You can extend your tax return and file during the period of extension; that’s not a late-filed return. The late-filed return is filed after the last extension expired. That’s what causes the three bad ... (continued)

Sale of Principal Residence Refresher

The $250,000 ($500,000, if married) home sale gain exclusion break is one of the great tax-saving opportunities. Unmarried homeowners can potentially exclude gains up to $250,000, and married homeowners can potentially exclude up to $500,000. You as the seller need not complete any special tax ... (continued)

More on Crytocurrency Taxable Transactions

Cryptocurrencies have gone mainstream. For example, you can use bitcoin to buy far more than you would think. To see, try googling “What can I buy with bitcoin?” You will get more than 350,000 hits. But using cryptocurrencies has federal income tax implications that may ... (continued)

Finding the Winning Strategy For Your IRS Audit

If you are undergoing or about to be audited by the IRS audit, you should know how your tax positions stack up against the IRS examiners’ positions. In most cases, you are discussing the facts, not the law, and you prove your facts with ... (continued)

Material Participation in Rental Properties-IRS Audit Case-$55,000 Result

Let me tell you about Lisa and Jimmy. They had a very unsatisfactory visit with the IRS. The auditor examined their three rental properties, disallowed their losses, and told them to expect a tax bill for $55,000. Current score: IRS $55,000 ahead. But one good thing happened ... (continued)

2 Easy Ways to Make Corrections to Your File Return

If you made an error on your tax return, don’t worry—there are two easy ways to fix it: A superseding return A qualified amended return A superseding return is an amended or corrected return filed on or before the original or extended due date. ... (continued)

Proper Allocation Needed for Your Investment Property

When you buy business or investment real property, such as an apartment building, you usually pay one lump sum for land, buildings, and other improvements. There’s no cost breakdown. You can’t depreciate land because it doesn’t wear out. So, as far as depreciation goes, land ... (continued)

PayPal 1099 Tax Loophole Going Bye Bye

The PayPal loophole is going away in a little over six months from now. You may remember the strategy where you can avoid giving 1099s to contractors and vendors when you use PayPal or a similar service as your payment platform. With this strategy, you push ... (continued)

CrytoCurrencies -Income Tax Implications

Cryptocurrencies have gone mainstream. For example, you can use bitcoin to buy far more than you would think. To see, try googling “What can I buy with bitcoin?” You will get more than 350,000 hits. But using cryptocurrencies has federal income tax implications that may surprise ... (continued)

1031 Exchanges to Defer Taxes on Real Estate Sales

Do you own business or investment property that has gone up in value? Would you like to acquire new property? If you sell the old property, you’ll have to pay tax on your profits. Don’t do that. Instead, do a tax-deferred Section 1031 transaction. With ... (continued)

Here is a Significant Reason To Invest in Historic Buildings

The Federal Rehabilitation Tax Credit, or rehab credit, offers significant financial incentives for owners and leaseholders of historic buildings to renovate those structures. What’s the big deal? Why are tax credits so exciting? Tax credits, unlike deductions, reduce your tax bill dollar-for-dollar. If you spend $100,000 ... (continued)

Child Tax Credit Increased Sunstantiallly in 2021!!

For the 2021 tax year only, the American Rescue Plan Act of 2021 (ARPA) makes big, taxpayer-friendly changes to the federal income tax child tax credit (CTC). Here’s what you need to know, starting with some necessary background information. CTC Basics For 2018-2020 and 2022-2025, the ... (continued)

Health Insurance Cost Changes--Please Read on!

With the passage of the American Rescue Plan Act of 2021 (ARPA), Congress has temporarily abolished the health insurance premium tax credit “subsidy cliff.” For 2020 and 2021, self-employed and small-business owners and other individuals who must purchase individual health insurance may qualify for ... (continued)

2020 May Be the Year to File Married Filing Separately-Please Read!!

If you are married, most likely you’ve always filed a joint tax return with your spouse. Most of the time, a joint return shows less overall tax than two separate tax returns do, because the married-filing-separately status has many tax disadvantages. Fast-forward to the 2020 tax ... (continued)

New Tax Law Increases in the Earned Income Tax Credit

The earned income tax credit (EITC) has been around for years. But for some folks, it’s never been worth as much as it will be for 2021. That’s thanks to liberalizations included in the American Rescue Plan Act of 2021 (ARPA). Some of the ... (continued)

Tax Bonanza--Expanded Individual Tax Credits for 2021

For tax year 2021, Congress is giving away billions of dollars in additional tax credits on your Form 1040 individual tax return. These temporarily expanded tax credits include the child tax credit, the dependent care credit, and the health insurance premium tax credit. With good planning ... (continued)

Disaster Losses--New Tax Law Qualifications

Disasters such as storms, fires, floods, and hurricanes damage or destroy property. If property such as an office building, rental property, business vehicle, or business furniture is damaged or destroyed in a disaster, your business may qualify for a casualty loss deduction. It’s easier to deduct ... (continued)

COVID 19 Boosts Temporary Tax Dedcutions & Credits

Embedded in the COVID-19 relief law is $900 billion for financial assistance. As you would expect in these unusual times, some of the relief is in the form of direct government financial assistance and some is from tax benefits that can impact both tax year ... (continued)

A Word About Stimulus Payments and Tax Implication(s)

They received the full amounts of both Economic Impact Payments if: Their first Economic Impact Payment was $1,200 for individuals; $2,400 married filing jointly for 2020, plus $500 for each qualifying child including those born in 2020. Their second Economic Impact Payment was $600 for individuals; ... (continued)

E-Filing Will Start February 12, 2021 for Individuals

The IRS will begin accepting and processing 2020 tax year returns on Friday, February 12, 2021. The most expedient way for taxpayers to receive their refunds is by filing electronically and choosing direct deposit for their refund. By Law. the IRS cannot issue refunds before mid-February ... (continued)

Tax Planning When Love One Passes

If you become an executor of your loved one’s estate, you may have some important tax decisions to make. Here are some quick thoughts. The decedent’s medical expenses provide you with planning opportunities to deduct as itemized deductions (subject to the 7.5 percent floor) not only ... (continued)

Domestic Service in Private Homes-What You Need to Know

You might not be aware that the “Nanny Tax” is not just limited to nannies. The IRS is stepping up its audits on those with workers in their private homes and its not just because of “nannies”. Here are some of the rules: the tax does ... (continued)

Here’s 4 More Year End Tax Strategies

The end of the year is approaching, so now is the time to utilize last-minute strategies to lower your tax bill. Here are four tax-deduction strategies that apply if you are getting married or divorced, have children who did or could work in your ... (continued)

It’s OK to Gamble This Way?

Most people gamble periodically. Rule 1- Your Winnings are taxable. Your income from gambling is taxable, and is reported to the IRS on Form W-2G. Rule 2- Keep records of your losses. You are allowed to offset your gambling winnings with your gambling losses-however, the IRS ... (continued)

Warning! The IRS is Now Outsourcing Tax Debts

The IRS is using 4 private collection agencies to collect inactive tax receivables. If you nor the IRS has taken any recent actions to resolve your tax debts, the IRS may assign your case to one of these agencies. Once your case is assigned, ... (continued)

HSA’S- Here’s Why They Work!

There are generally tax strategies that can work for you and your business, if you understand the tax code. The Health Savings Account is a powerful part of a health care strategy because: saves you $$$ through lower taxes grows tax-free gives you a chance to ... (continued)

Simple Strategy for 100% Tax-Free Rental Income!

Generally rental income is similar to any other income, its taxable income subject to income tax. However, there is a loophole known by a very few, that allows in the tax law certain amount of tax-free rental income. Yes, tax-free, and not reported on your ... (continued)

New IRS Repair Regulations for Real Estate Investors

Owning a building has many headaches–such as new roofs, HVAC Units, lighting systems, etc., as they all eventually new replacement. Prior law added to these unwanted events, as you were stuck capitalizing and depreciating the new roof-and continued to to depreciate the old one ... (continued)

2015 Dirty Dozen Tax Scams

On February 6th, the IRS released its 2015 “Dirty Dozen” tax scams list, and also posted the 2015 version of “The Truth about Frivolous Tax Arguments.” Compiled annually, the dirty dozen lists a variety of common scams that taxpayers may encounter during the busy ... (continued)

ObamaCare and Your Taxes

Here are 5 important points that you should know about the new Health Insurance and your taxes: Watch the mail for From 1095-A. If you enrolled in a Marketplace healthcare plan in 2014, you’ll get this new form in the mail from the Marketplace ... (continued)

The Alternative Minimum Tax-The Worst Tax of All!

The Alternative Minimum Tax (AMT) is a tax on your deductions. Yes, you read that right. Its an additional tax that is calculated and added to the regular tax computed. The AMT stealth tax works by eliminating or reducing taxpayer’s deductions that one gets ... (continued)

Here’s Some Ways to Negate the Kiddie Tax

The Kiddie Tax was created by lawmakers to prevent taxpayers from shifting income to their children to take advantage of the child’s lower tax bracket. This tax can arise also without income shifting as well. Does your child have investment accounts that generate income? ... (continued)

Potential Tax Credit for Summer Camp for Your Children

There are many benefits to sending your children to summer camp, but did you know the IRS will give you a tax credit for the cost and effort. If your child goes to day camp this summer while you and your spouse work, the ... (continued)