Category: Taxation-Individuals

Are you feeling generous? Qualified charitable contributions can be rewarded with sizeable tax breaks during the second calendar year of the COVID-19 pandemic. Recent legislation includes the following four temporary tax law changes that are designed to help individuals and businesses that donate to charities through the end of 2021. 1. Deductions for Non-Itemizers In the past, you could claim significant itemized deductions on your federal income tax return for contributing money or property (or both) to qualified charitable organizations… Read more ›

  Real estate investors often unload one property and replace it with another. But making an outright sale of an appreciated property results in a current tax hit. That’s unfortunate if you intend to use the sales proceeds to buy replacement property. The good news: Section 1031 of the Internal Revenue Code allows you to postpone your tax bill by arranging for a property exchange. With real estate prices up dramatically in many markets, the Section 1031 exchange strategy is… Read more ›

  It might be advantageous from a tax standpoint to run a business through multiple entities. For example, a construction company might form a separate company to own and lease its trucks and equipment back to its related entities. Or a corporation might transfer appreciated property to an affiliated corporation in order to limit risk in case it is sued. However, the IRS may look twice at an operation if it includes multiple business entities — especially if recordkeeping and… Read more ›

  Many companies choose not to combine real estate and other assets into a single entity. Perhaps the business fears liability for injuries suffered on the property. Or legal liabilities encountered by the company could affect property ownership. But there are valid and potentially beneficial tax reasons for holding real estate in a separate entity as well. Avoiding Costly Mistakes Many businesses operate as C corporations so they can buy and hold real estate just as they do equipment, inventory,… Read more ›

Payments made to liquidate a retired partner’s ownership interest in the partnership (other than payments for his or her share of certain partnership assets) are usually subject to the federal self-employment tax (also known as SE tax). That can amount to a large tax bite. Fortunately, there is a taxpayer-friendly exception. When it applies, this exception can exempt partner retirement payments from SE tax. If the retirement plan is properly structured, even large payments made in the years just after… Read more ›

How does the Tax Cuts and Jobs Act (TCJA) affect divorce settlements? Changes in the new law may require divorcing individuals — especially those who own businesses and other investments — to take a different approach to splitting assets and setting maintenance payments than under prior law. To illustrate, consider Pat and Chris, a hypothetical married couple who decided to file for divorce on Valentine’s Day 2019. Here’s an overview of several key issues they face. Business Tax Issues Pat… Read more ›

  For purposes of the Child Tax Credit for the 2021 tax year, a qualifying child is one who doesn’t turn 18 before January 1, 2022, and who satisfies certain other conditions. Taxpayers who don’t qualify for the Child Tax Credit because their children are too old may have an alternative. The Credit for Other Dependents maxes out at $500 per dependent if certain conditions are met. To qualify, a dependent must: Be age 17 or older; Have an individual… Read more ›

  Almost three months after it passed the U.S. Senate, the U.S. House of Representatives has passed the Infrastructure Investment and Jobs Act (IIJA), better known as the bipartisan infrastructure bill. While the bulk of the law is directed toward massive investment in infrastructure projects across the country, a handful of noteworthy tax provisions are tucked inside it. Here’s what you need to know about them. Early termination of the Employee Retention Credit The IIJA terminates the Employee Retention Credit… Read more ›

  Potential Income Tax Implications of the Build Back Better Act The House of Representatives passed the Build Back Better Act Friday on November 19. The bill still must pass the Senate and be signed by the President. In its current form, the bill contains a variety of individual income tax provisions to provide incentives to taxpayers and raise revenue to pay for new spending. CBM will continue to communicate with you as the bill passes to the Senate and… Read more ›

Do you own real estate that will produce a big capital gain when you sell it? Fortunately, you may be able to realize significant tax benefits by negotiating an installment sale of the property. However, there are several potential tax traps to avoid. How do you qualify for installment sale reporting? It’s relatively easy. All you have to do is arrange to receive payments over at least two tax years. For example, say you contract to sell real estate in December… Read more ›