Category: Taxation-Individuals

Contrary to popular belief, there’s nothing in the U.S. Constitution or federal law that prohibits multiple states from collecting tax on the same income. Although many states provide tax credits to prevent double taxation, those credits are sometimes unavailable. If you maintain residences in more than one state, here are some points to keep in mind. Domicile vs. Residence Generally, if you’re “domiciled” in a state, you’re subject to that state’s income tax on your worldwide income. Your domicile isn’t… Read more ›

If you operate a business that collects payroll taxes from employees, here’s a warning: Regardless of what your corporate financial situation is, don’t borrow from the withholding tax fund. If that money isn’t there when it’s due, Uncle Sam will crack down hard. All businesses face downturns when cash flow dries up. It may be tempting to look at payroll tax money as an easy fix to a cash crunch. “I’ll send it in later,” you may think. But when… Read more ›

  For years, people have questioned the long-term viability of the Social Security system. While you can’t do much about that, you can start planning how to maximize your Social Security benefits when you’re eligible to claim them. People approaching retirement age often have questions about benefits they may be eligible to receive from the Social Security Administration (SSA). Here are eight of the most commonly asked queries: 1. How Soon Can I Start Collecting Retirement Benefits? If you want… Read more ›

  The individual alternative minimum tax (AMT) rules were made more taxpayer-friendly for 2018 through 2025 by the Tax Cuts and Jobs Act (TCJA). The odds that you’ll owe the AMT for those years have been significantly reduced — and, if you still owe the AMT, you’ll probably owe less than under prior law. Are you at risk for this dreaded tax? Various factors make it difficult to pinpoint exactly who will be hit by the AMT. Here’s a summary… Read more ›

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 ›