This is a tax on athletes who play in different cities and states. Did you know this first started in 1991 after California started taxing the earnings of Chicago Bulls players? It was in the 1991 NBA Finals when the LA Lakers played the Chicago Bulls in the Finals that year (which the Bulls won in 5 games). Illinois retaliated and soon nearly every state added their own version of this tax because they love money!
Really? They got beat at Home and the State's Response was to Punish their pockets... Did they not know that other States could do the same thing? This Petty move generated to California in 2013 over $200 Million in Income Tax from athletes. It is estimated that almost 45% of athletes salaries are paid to taxing authorities.
Will your business operation create the 20 percent tax deduction for you?
If not, and if that is due to too much income and a lack of (a) wages and/or (b) depreciable property, a switch to the S corporation as your choice of business entity may produce the tax savings you are looking for.
Tax reform created taxes on employee fringe benefits for bicycles.
You could (and can) deduct your costs for reimbursing employees for their qualified bicycle transportation costs. But tax reform now makes this bicycle transportation benefit a taxable event for your employees.
In what for this tax reform is an interesting twist, businesses may continue to pay the $20 bicycle benefit, but they must add the benefit to the employee’s W-2 and subject it to withholding and payroll taxes.
Nevertheless, The employee continues to come out ahead with the bicycle reimbursement even though it’s taxable.
If your pass-through business is an in-favor business and it qualifies for tax reform’s new 20 percent tax deduction on qualified business income, you benefit at all times, including being above, below, or in the expanded wage and property phase-in range.
On the other hand, if your business is a specified service trade or business (doctors, lawyers, accountants, actors, athletes, traders, etc.), it is in the out-of-favor group and you benefit only when you are in or below the phaseout range.
Once your taxable income exceeds the threshold amounts above, you arrive in one of the four possible categories below:
If your taxable income is going to be above the threshold amounts that trigger the phase-in or phaseout issues, contact us so we can spend some time on your tax planning.
The new 2018 Section 199A tax deduction that you can claim on your IRS Form 1040 is a big deal. There are many rules (all new, of course), but your odds as a business owner of benefiting from this new deduction are excellent.
One of the Key Measures you can rejoice about is if you receive income from operations as a sole proprietorship, limited liability companies, partnership, or S corporation, because your 2018 income from these businesses can qualify for some or all of the new 20 percent deduction.
The IRS will begin accepting tax returns on January 29.
Although the IRS will begin accepting both electronic and paper tax returns January 29, paper returns will begin processing later in mid-February as system updates continue.
The IRS cannot issue refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) before mid-February. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting on February 27, if they chose direct deposit and there are no other issues with the tax return.
The recently enacted Tax Cuts and Jobs Act (TCJA) has altered the tax landscape for a lot of individuals and businesses. The changes are extensive and this blog provides a high-level overview of some of the highlights to keep you informed. Due to the sweeping nature of the changes and the need for continued guidance, we’d like the opportunity to have a personalized conversation with you now to discuss planning opportunities for your specific situation. Additional conversations and tax projections are likely necessary to ensure we maximize your tax benefits. Please call our office at your earliest convenience to schedule a meeting.
As always, planning ahead can help you minimize your tax bill and position you for greater success. 262-358-8297
Changes to itemized deductions
We are at your disposal to identify opportunities within the new law that apply to you and help steer you away from new pitfalls and challenges. Please call our office today at 262-358-8297 to set up a tax planning meeting. As always, planning ahead can help you minimize your tax bill and position you for greater success.
The recent tax reform contains two big changes to how much you can deduct in mortgage interest for tax years 2018 through 2025:
Exception alert. Your home equity loan may include acquisition or home-improvement debt, and that debt continues as deductible under the recent tax reform rules.
Example. Billy took out a $90,000 home equity loan in 2015. He used $50,000 to remodel portions of his home and used the remaining $40,000 for his daughter’s college tuition. Billy’s total home mortgages never exceeded $1.1 million. Under the new law, Billy may deduct five-ninths of his home equity loan interest in 2018.
Acquisition debt. When you buy your main home or a second home and take out mortgages secured by those homes, your mortgages are called acquisition debt. You can add acquisition debt when you improve your main or second home, and that new debt is secured by the home you improved.
Refinancing alert. Your acquisition debt does not increase when you refinance unless you use the new monies to improve the home.
Example. Tom bought a home in 2010 and took out a $500,000 mortgage that he secured with the home. In 2018, Tom has paid down his mortgage to $430,000, and his home has increased in value to $800,000. Tom refinances the home and takes out a new mortgage in the amount of $600,000, secured by the home.
If Tom uses none of the new money to improve his home, his mortgage interest deduction in 2018 is based on the $430,000 of mortgage principal that remained as of the date of his refinancing. To put this in perspective, your original acquisition debt never increases on that original home. To increase your debt eligible for the home mortgage interest deduction, you need to use the new debt to improve the home.
Ceilings. Because of tax reform, you now have two possible 2018 ceilings on your home mortgages that are eligible for the mortgage interest deductions.
$1.1 million. For indebtedness incurred before December 15, 2017, you may not deduct interest on more than $1.1 million in mortgages ($1 million in acquisition debt and $100,000 in home equity debt used for acquisition or improvements). The original $1.1 million ceiling is grandfathered for acquisition and improvement loans in existence before December 15, 2017.
Example. Sam took out his mortgages during 2013. Sam faces the $1.1 million ceiling in 2018.
$750,000. For home mortgage indebtedness incurred on or after December 15, 2017, you may deduct interest on no more than $750,000 of home mortgages.
Example. Jim took out his mortgage in 2018. He faces the $750,000 ceiling.
Exception. If you entered into a written, binding contract before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018, and you complete the purchase before April 1, 2018, you fall into the $1.1 million ceiling category.
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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.
Keana 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.