 The tax code's offset game can help you reduce your 2021 income taxes. You are allowed to use long-term losses to create the allowed deduction against ordinary income.
Now, if you have lots of capital losses or capital loss carryovers, there are strategies to offset them. Another strategy is to give appreciated stock to your parents and non-kiddie-tax children. You get a bigger bang for your buck by gifting them stock, then having them sell the stock. Tax law allows you to carry forward the excess until used, for up to five years. If you will like my assistance schedule some time to chat with me.
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 Small-business owners with one to 49 employees should have a medical plan for their business. You can claim a tax credit equal to 100 percent of required (2020) and voluntary (2021) emergency sick leave and emergency family leave payments.
If you operate your business as an S corporation, you need the S corporation to pay for or reimburse you for the health insurance, and put it on your W-2. You could also claim the tax credit for the group health insurance you give your employees. If you need more insights into the medical deduction opportunities, please contact me!  You have time before December 31 to take steps that will help fund your retirement.
Did you know you can Claim the New, Improved Retirement Plan Start-Up Tax Credit of Up to $15,000. Also, the SECURE Act added a non-refundable credit of $500 per year for up to three years. Hey and there is the Roth IRA, over its lifetime can produce far superior financial results to the traditional retirement plan. You can withdraw the monies you put into your Roth IRA at any time, both tax-free and penalty-free. Unlike with the traditional IRA, you don't have to receive required minimum distributions from a Roth IRA. If you would like to know more about the last minute tax strategies and need my assistance schedule an business consultation with me today!  The big advantage of 529 plans is that qualified withdrawals are always federal-income-tax-free—and usually state-income-tax-free too. What you may not know is that not all 529 withdrawals are tax-free qualified withdrawals, even in years when you have heavy college costs. Here are six important points to know about 529 withdrawals. Tip 1: You Usually Have Several Payment Options Say you are the 529 account owner or plan participant. Plans commonly use both terms to describe the person who established and controls the account. This letter will use account owner. As the account owner, you can generally have a withdrawal check cut in your own name or have an electronic deposit made into your own account. Alternatively, you can have a withdrawal issued in the name of the account beneficiary (the college student for whom you set up the 529 account, usually a child or grandchild) or issued directly to the educational institution for the benefit of the account beneficiary. You choose your payment option by submitting a withdrawal request to the 529 plan. Tip 2: Watch Out for Withdrawals from 529 Accounts Funded with Custodial Account Money Say you funded the 529 account with money that came from a custodial account that was set up for the account beneficiary—your child or grandchild—under your state’s Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA). In this situation, you must use any money taken from the custodial account for the benefit of the child or grandchild. You can’t take a 529 account withdrawal for yourself if the 529 account was funded with money from a child’s or grandchild’s custodial account. Because the money in the 529 account came from the custodial account, the 529 account money legally belongs to your child or grandchild, not you. On the other hand, if you funded the 529 account with your own money, the money in the account is fair game. You can take withdrawals and do whatever you want with them—subject to the potential federal income tax implications explained later. Tip 3: The IRS Knows about Withdrawals For any year that a 529 withdrawal is taken, the plan must issue a Form 1099-Q, Payments From Qualified Education Programs (Under Sections 529 and 530), by February 1 of the following year. If the withdrawal goes to the 529 account beneficiary (your child or grandchild), the 1099-Q goes to him or her. If the withdrawal goes to you as the account owner, the 1099-Q goes to you. Either way, the IRS gets a copy, so the IRS knows what happened. Tip 4: Withdrawals May Be Taxable Even in Years When Substantial College Costs Are Incurred When the Form 1099-Q shows withdrawn earnings, the IRS becomes interested in the 1099-Q recipient’s Form 1040 because some or all of the earnings might be taxable. Here’s the deal on that. Withdrawn earnings are always federal-income-tax-free and penalty-free when total withdrawals for the year do not exceed what the IRS calls the account beneficiary’s adjusted qualified education expenses, or AQEE, for the year. AQEE equals the sum of the 529 account beneficiary’s
Next, you must subtract any federal-income-tax-free educational assistance to calculate the account beneficiary’s AQEE. According to the IRS, tax-free educational assistance includes costs covered by
In addition, tax-free educational assistance includes any costs used to claim the American Opportunity tax credit or the Lifetime Learning tax credit. Key point. You can also include in AQEE
Bottom line. When withdrawals during the year exceed AQEE for the year, all or part of the withdrawn earnings will be taxable. When withdrawals don’t exceed AQEE, all the withdrawn earnings are federal-income-tax-free. Tip 5: When You Keep a Withdrawal, There Are Tax Consequences Assuming the 529 account was funded with your own money (as opposed to money from a custodial account), you are free to change the 529 account beneficiary to yourself and then take federal-income-tax-free withdrawals to cover your own AQEE if you decide to go back to school. But if you take a withdrawal that you use for purposes other than education, report the taxable portion of any related account earnings as miscellaneous income on your Form 1040. Taxable amounts may also get hit with a 10 percent penalty tax to boot (see below). Finally, if you liquidate a loser 529 account (worth less than the total amount of contributions), there are no federal income tax consequences. (The government stopped participating in your losses for tax years 2018-2025.) Tip 6: Withdrawals Not Used for Education Can Also Be Hit with a 10 Percent Penalty Tax As explained earlier, some or all of the earnings included in a 529 withdrawal taken during the year must be included in gross income when the withdrawals exceed the account beneficiary’s AQEE for the year. But there’s more. According to the general rule, the taxable amount of earnings is also hit with a 10 percent penalty tax. But the 10 percent penalty tax doesn’t apply to earnings that are taxable only because the account beneficiary’s AQEE was reduced by
In addition, the 10 percent penalty tax doesn’t apply to earnings withdrawn when the account beneficiary attends one of the U.S. military academies (such as West Point, Annapolis, or the Air Force Academy). Finally, the 10 percent penalty tax doesn’t apply to earnings withdrawn after the account beneficiary dies or becomes disabled. If you have any questions about the 529 plan, please do not hesitate to contact us. If you have any questions about the 529 plan, please do not hesitate to contact us.  Are you considering buying a car, a computer, or other equipment, or a building?
Personal-use property is not deductible. A business can deduct the full cost utilizing standard, bonus, or IRC Section 179 expensing. Through 2022, bonus depreciation allows you to deduct 100% of the cost of personal property in one year. Sec. 179 provides for an annual deduction of up to $1,050,000 in personal property. However, if you buy property to start a new firm, depreciation does not begin. To claim depreciation, you must be in business. It doesn't matter if you make sales or profits—just that your firm is viable. Also, depreciation doesn't start when you buy a commercial property. It begins when you use property in your business. Not using the property is not required, but it must be available for use in your active business. This may happen after you buy the home. Finally, if you employ normal depreciation, you must follow standards to identify the start month. The earlier you file, the higher your first-year deduction. Personal property depreciation begins on July 1 of the first year (mid-year convention). However, if you buy 40% or more of your personal property in the fourth quarter, depreciation begins at the midpoint of the next quarter (mid-quarter convention). First-year depreciation for real estate begins in the middle of the month of installation (mid-month convention). If you need clarification or require my assistance, contact me! Sincerely, |
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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. 
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