20 Nov 2018
0

(#434) Time for NQDC Plan Deferral Elections

Roger Rossmeisl, CPA
Taxes

If you’re an executive or other key employee, your employer may offer you a nonqualified deferred compensation (NQDC) plan. As the name suggests, NQDC plans pay employees in the future for services currently performed. The plans allow deferral of the income tax associated with the compensation. But to receive this attractive tax treatment, NQDC plans must meet many requirements. One is that employees must make the deferral election before the year they perform the services for which the compensation is earned. So, if you wish to defer part of your 2019 compensation, you generally must make the election by the end of 2018. NQDC plans vs. qualified plans NQDC plans differ from qualified plans, such as 401(k)s, in that: NQDC plans can favor highly compensated employees, Although your...

20 Nov 2018
0

(#433) Buy Business Assets Before Year-End to Reduce Your 2018 Tax Liability

Roger Rossmeisl, CPA
Taxes

The Tax Cuts and Jobs Act (TCJA) has enhanced two depreciation-related breaks that are popular year-end tax planning tools for businesses. To take advantage of these breaks, you must purchase qualifying assets and place them in service by the end of the tax year. That means there’s still time to reduce your 2018 tax liability with these breaks, but you need to act soon. §179 expensing §179 expensing is valuable because it allows businesses to deduct up to 100% of the cost of qualifying assets in Year 1 instead of depreciating the cost over a number of years. §179 expensing can be used for assets such as equipment, furniture and software. Beginning in 2018, the TCJA expanded the list of qualifying assets to include qualified improvement...

12 Nov 2018
0

(#430) Donate Appreciated Stock for Twice the Tax Benefits

Roger Rossmeisl, CPA
Taxes

A tried-and-true year end tax strategy is to make charitable donations. As long as you itemize, and your gift qualifies, you can claim a charitable deduction. But did you know that you can enjoy an additional tax benefit if you donate long-term appreciated stock instead of cash? 2 benefits from 1 gift Appreciated publicly traded stock you’ve held more than one year is long-term capital gains property. If you donate it to a qualified charity, you may be able to enjoy two tax benefits: If you itemize deductions, you can claim a charitable deduction equal to the stock’s fair market value, and You can avoid the capital gains tax you’d pay if you sold the stock. Donating appreciated stock can be especially beneficial to taxpayers facing the 3.8%...

12 Nov 2018
0

(#429) Could “Bunching” Medical Expenses Into 2018 Save You Tax?

Roger Rossmeisl, CPA
Taxes

Some of your medical expenses may be tax deductible, but only if you itemize deductions and have enough expenses to exceed the applicable floor for deductibility. With proper planning, you may be able to time controllable medical expenses to your tax advantage. The Tax Cuts and Jobs Act (TCJA) could make bunching such expenses into 2018 beneficial for some taxpayers. At the same time, certain taxpayers who’ve benefited from the deduction in previous years might no longer benefit because of the TCJA’s increase to the standard deduction. The changes Various limits apply to most tax deductions, and one type of limit is a “floor,” which means expenses are deductible only to the extent that they exceed that floor (typically a specific percentage of your income). One example...

12 Nov 2018
0

(#428) Research Credit Available to Some Businesses for the First Time

Roger Rossmeisl, CPA
Taxes

The Tax Cuts and Jobs Act (TCJA) didn’t change the federal tax credit for “increasing research activities,” but several TCJA provisions have an indirect impact on the credit. As a result, the research credit may be available to some businesses for the first time. AMT reform Previously, corporations subject to alternative minimum tax (AMT) couldn’t offset the research credit against their AMT liability, which erased the benefits of the credit (although they could carry unused research credits forward for up to 20 years and use them in non-AMT years). By eliminating corporate AMT for tax years beginning after 2017, the TCJA removed this obstacle. Now that the corporate AMT is gone, unused research credits from prior tax years can be offset against a corporation’s regular tax liability and...

04 Nov 2018
0

(#424) Selling Your Business? Defer – and Possibly Reduce – Tax with an Installment Sale

Roger Rossmeisl, CPA
Taxes

You’ve spent years building your company and now are ready to move on to something else, whether launching a new business, taking advantage of another career opportunity or retiring. Whatever your plans, you want to get the return from your business that you’ve earned from all of the time and money you’ve put into it. That means not only getting a good price, but also minimizing the tax hit on the proceeds. One option that can help you defer tax and perhaps even reduce it is an installment sale. Tax benefits With an installment sale, you don’t receive a lump sum payment when the deal closes. Instead, you receive installment payments over a period of time, spreading the gain over a number of years. This generally defers tax, because...

01 Nov 2018
0

(#420) 529 Plans Offer Two Tax-Advantaged Education Funding Options

Roger Rossmeisl, CPA
Taxes

Section 529 plans are a popular education-funding tool because of tax and other benefits. Two types are available: prepaid tuition plans, and savings plans. And one of these plans got even better under the Tax Cuts and Jobs Act (TCJA). Enjoy valuable benefits 529 plans provide a tax-advantaged way to help pay for qualifying education expenses. First and foremost, although contributions aren’t deductible for federal purposes, plan assets can grow tax-deferred. In addition, some states offer tax incentives for contributing in the form of deductions or credits. But that’s not all. 529 plans also usually offer high contribution limits. And there are no income limits for contributing. Lock in current tuition rates With a 529 prepaid tuition plan, if your contract is for four years of tuition, tuition is guaranteed regardless...

31 Oct 2018
0

(#419) Consider All the Tax Consequences Before Making Gifts to Loved Ones

Roger Rossmeisl, CPA
Taxes

Many people choose to pass assets to the next generation during life, whether to reduce the size of their taxable estate, to help out family members or simply to see their loved ones enjoy the gifts. If you’re considering lifetime gifts, be aware that which assets you give can produce substantially different tax consequences. Multiple types of taxes Federal gift and estate taxes generally apply at a rate of 40% to transfers in excess of your available gift and estate tax exemption. Under the Tax Cuts and Jobs Act, the exemption has approximately doubled through 2025. For 2018, it’s $11.18 million (twice that for married couples with proper estate planning strategies in place). Even if your estate isn’t large enough for gift and estate taxes to currently be...

23 Oct 2018
0

(#415) Charitable IRA Rollovers May Be Especially Beneficial in 2018

Roger Rossmeisl, CPA
Taxes

If you’re age 70½ or older, you can make direct contributions — up to $100,000 annually — from your IRA to qualified charitable organizations without owing any income tax on the distributions. This break may be especially beneficial now because of Tax Cuts and Jobs Act (TCJA) changes that affect who can benefit from the itemized deduction for charitable donations. Counts toward your RMD A charitable IRA rollover can be used to satisfy required minimum distributions (RMDs). You must begin to take annual RMDs from your traditional IRAs in the year you reach age 70½. If you don’t comply, you can owe a penalty equal to 50% of the amount you should have withdrawn but didn’t. (Deferral is allowed for the initial year, but you’ll have to...

17 Oct 2018
0

(#410) Now’s the Time to Review Your Business Expenses

Roger Rossmeisl, CPA
Taxes

As we approach the end of the year, it’s a good idea to review your business’s expenses for deductibility. At the same time, consider whether your business would benefit from accelerating certain expenses into this year. Be sure to evaluate the impact of the Tax Cuts and Jobs Act (TCJA), which reduces or eliminates many deductions. In some cases, it may be necessary or desirable to change your expense and reimbursement policies. What’s deductible, anyway? There’s no master list of deductible business expenses in the Internal Revenue Code (IRC). Although some deductions are expressly authorized or excluded, most are governed by the general rule of IRC Sec. 162, which permits businesses to deduct their “ordinary and necessary” expenses. An ordinary expense is one that is common and accepted in...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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