Sec. 529 plans have been a widely used tool to help taxpayers save money for college, presuming they distribute that money for qualified higher-education costs. Depending on your Sec. 529 plan, you may be eligible for a state tax deduction for contributions to the plan. The TCJA expanded the opportunities available for education tax planning by permitting $10,000 per year to be distributed from Sec. 529 plans to pay for private elementary and secondary tuition. Contact us to learn how these new rules may help you pay for private school tuition for your family.
Contact us to learn how these new rules may help you pay for private school tuition for your family. 262-358-8297
What is Passive Foreign Investment Firm?
A Passive Foreign Investment Corporation is any foreign investment company where 75% or more of its gross income for the tax year is from passive income or 50% or more of its assets produce passive income or are held to produce passive income.
What Type of Income is Included in Passive Foreign Income?
Passive Income includes most investments income i.e. Interest, dividends, rents, annuities, and the sale or exchange of capital assets. Almost all foreign mutual funds are Passive Foreign Investment Firms (Corporation). Stock you hold directly in a corporation can also be a Passive Foreign Investment Firm/Corporation stock if the foreign corporation's activities meet one of the test to the left.
*this list is not exhaustive.
When you convert your existing traditional IRA into a Roth IRA and then reverse the transaction by switching the account back to traditional IRA status, the reversal is called a recharacterization in the IRS world.. If you had a sizable accumulation in your traditional IRA, the ability to convert that traditional IRA to a Roth IRA and also change your mind when things were backfiring was a terrific tax and financial planning break.
However, if you make a Roth conversion transaction in 2018 and beyond, the Tax Cuts and Jobs Act (TCJA) permanently eliminates your ability to recharacterize the account back to traditional IRA status.
Look at the new TCJA rule this way: when you make the decision to convert your existing traditional IRA or other retirement plan to a Roth, that’s a final decision for 2018 and beyond.
There was a time when you could convert your rental property or vacation home to a principal residence and then use the full $250,000/$500,000 home-sale exclusion to avoid taxes, those days are gone!
Today the $250,000/$500,000 exclusion works quite different. You are required to divide your period of home ownership into the following two categories:
It is important to note the exception to the nonqualified use is that nonqualified use doesn't include rental use during the five-year period that's after the last date you and or your spouse used the property as your principal residence.
If you will like to discuss this further please don't hesitate to contact us!
You probably like your personal vehicle just as it is. But wouldn’t you like it far better if it were producing tax deductions? Perhaps big deductions, immediately. And the Tax Cuts and Jobs Act gives you the tax reform road map on how to do this.
Of course, to make this happen, you need to strip your personal vehicle of its personal status and re-dress it as a business vehicle. This is not difficult. In its new business dress, your former personal vehicle can qualify for up to 100 percent bonus depreciation.
Example. Kevin has a personal vehicle with a tax basis for depreciation of $31,000. With 70 percent business use on this 100 percent bonus depreciation–qualifying vehicle, Kevin has a new $21,700 tax deduction for this year ($31,000 x 70 percent).
Often in an IRS audit, the examiner will request your mileage log at the start of the audit. If you do not have a mileage log, then you are at risk of losing more than just vehicle deductions. Let’s consider what they will think it.
If you don’t have a log for mileage, the IRS examiner may think about your other records. Pondering on that thought, the examiner may also think you are a mischievous taxpayer with mischievous tax records who needs extra scrutiny.
The IRS says that you may keep an adequate record for part of a tax year and use that part-year record to substantiate your vehicle’s business use for the entire year.
To use a sample record, you need to prove that your sample is representative of your use for the year.
By using your appointment book as the basis for your mileage, you not only build great business-use proof, but you also do a great job of showing that your sample vehicle record mirrors your general appointments during the year.
(If you are using a mileage app, synchronize the app results with the appointment book.)
Henry David Thoreau was on of the first if not thee first man to practice passive resistance. Thoreau chose to spend a night in jail rather than pay what he considered an unfair tax. Thoreau acted this way in order to protest the United States's war with Mexico and slavery for which the monies from the tax would proceed.
Thoreau was jailed but was released the next day when an unidentified person came to the jail to pay his debt. This angered Thoreau because he had hoped to use the opportunity to raise awareness to his cause.
Nonetheless, he reluctantly left his jail cell. The experience later inspired Thoreau to write his essay Resistance to Civil Government, which was later renamed in which Civil Disobedience, in which he argues that it is sometimes necessary to disobey the law in order to protest unjust government actions.
This is such a powerful lesson even today. If you can find sometime to read the essay it is about 16 pages.
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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.