Have you considered hiring your children to work on your rental properties? If so, were you concerned when you did not see a line item for wages on Schedule E of your Form 1040?
Don’t let that bother you. The IRS in its instructions explains that wages and other ordinary and necessary business expenses of the rental that are not named on Schedule E go on line 19. Because you own more than one rental property, your children may work on more than one. No problem. You need to allocate the wages and associated expenses to the properties on a reasonable basis. The most apparent allocation basis for the money you are paying the children being time spent by the children at each property.
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IRS has released the Code § 280F depreciation limits for business passenger automobiles placed in service by the taxpayer in 2018, taking into account the changes made by the Tax Cuts and Jobs Act . IRS has also released the annual income inclusion amounts for such vehicles first leased in 2018. The tax law limits the amount you can deduct for depreciation of your car, truck or van. The § 179 deduction is also treated as depreciation for purposes of these limits. The maximum amount you can deduct each year depends on the year you place the car in service. The 2018 luxury vehicle limits are below. The TCJA modified Code § 168( k) to extend the additional (bonus) first-year depreciation deduction for qualified property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2027. Under the TCJA, a 100% bonus first-year deduction of the adjusted basis is generally allowed for qualified property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023 (for certain property with longer production periods, the end date is increased by one year). In later years, the first-year bonus depreciation deduction phases down, as follows:
In the case of a passenger automobile, for qualified property acquired by the taxpayer before Sept. 28, 2017, and placed in service by the taxpayer during 2018, Code § 168( k)))(2)(F)(iii) increases the first-year depreciation allowed under Code Sec. 280F by $6,400. For qualified property acquired and placed in service after Sept. 27, 2017, Code § 168( k)(2)(F)(i) increases the first-year depreciation allowed under Code § 280F by $8,000. Guidance. The following are the annual depreciation dollar caps for vehicles that are subject to the luxury auto limits of Code § 280F and are placed in service by the taxpayer in calendar year 2018. As Code § 280F(a), as amended by the TCJA, provides the limits on depreciation for passenger automobiles placed in service during calendar year 2018, no adjustment for inflation applies to calendar year 2018. The depreciation limits for passenger automobiles acquired by the taxpayer before Sept. 28, 2017, and placed in service by the taxpayer during calendar year 2018, for which the Code § 168( k) bonus first-year depreciation deduction applies, are: The depreciation limits for passenger automobiles acquired by the taxpayer after Sept. 27, 2017, and placed in service by the taxpayer during calendar year 2018, for which the Code § 168( k) bonus first year depreciation deduction applies, are: The depreciation limits for passenger automobiles placed in service during calendar year 2018 for which no Code § 168( k) bonus first-year depreciation deduction applies are: By Firm StaffWith regards to the recent Tax Reform it is unclear if Fringe benefits will be a good thing. In the Case of the S Corp it may or may not be if you own more than 2% of the company. Regardless if you benefit the Federal tax law does allow the cost of fringes benefits as an deductible expenses for your S corporation tax return. However, Shareholders who owns more than 2%, may suffer additional taxes on some of the benefits because the tax code requires your corporation to put selected benefits on your W-2. The outcome is sometimes favorable and sometimes not. The rule that cases this concern is the following:
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances. AuthorKeana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients. |