Tax Tips
Can the IRS Require Odometer Readings with the Mileage Rate?
Do you claim your business miles at the IRS optional rate? If so, imagine you are now being audited by the IRS for your business mileage. The IRS has requested odometer readings for your vehicle. You might wonder if the IRS can do this. The Law The answer is...
Tax Reform Puts Screws to Hobbies
The tax law has mistreated hobbies for a long time. But the most recent tax reform brings the grim reaper to the party, and it’s not pleasant. This means you need to focus on making your activity a business and not a hobby. The Law Under both prior law and the...
Buy Your Employees (and Yourself) Flowers and Fruit, and Deduct the Cost
Under the de minimis fringe benefit rules, your business deducts the cost of giving you or your employees flowers, fruit, books, and similar property under special circumstances. The recipients—you or your employees—receive these fringe benefits tax-free. You can’t do...
Know These Tax Rules If Your Average Rental Is Seven Days or Less
If you own a condominium, cottage, cabin, lake or beach home, ski lodge, or similar property that you rent for an “average” rental period of seven days or less for the year, you have a property with unique tax attributes. Seven days example Say you have a beach...
How to Handle Multiple Rental Activities and the 20% Deduction
When you have multiple rental activities, here’s what you need to consider: • Are your rental activities multiple trades or businesses, or one trade or business?• Can you aggregate the rentals for Section 199A purposes? Do you want to?• How does the Section 199A...
QBI Issue When Your S Corp Is a Partner in a Partnership
The tax-saving strategy of S-corporation as a partner does affect your Section 199A deduction. Guaranteed payments are not qualified business income (QBI) for the Section 199A deduction. The non-QBI guaranteed payment rule applies whether the partner receives the...
Combine Home Sale with the 1031 Exchange
The tax-saving strategy is to combine the tax-avoidance advantage of the principal residence gain exclusion break with the tax-deferral advantage of a Section 1031 like-kind exchange. With proper planning, you can accomplish this tax-saving double play with full IRS...
Tax Reform Allows Depreciation on Purchase of Leased Vehicle
The TCJA made two changes that mean 100 percent bonus depreciation is available on the vehicle you lease and then purchase, regardless of whether you purchase it during the lease term or at the end of the lease. The two technical reasons you can do this are as...
Give to Charity, but Make It Tax Deductible as a Business Expense
Tax planning to classify payments to charities as business expenses has been around for some time when lawmakers put limits on the charitable contributions and when 2017 tax reform (TCJA) almost doubled the standard deduction amounts. The planning history makes good...
Deduct Your Costs of Sponsoring Sports Teams
The IRS Says . . .Revenue Ruling 70-393 states that the monies spent to outfit and support a sports team are similar to monies spent on other methods of advertising; accordingly, you may deduct them as business expenses for federal income tax purposes. Here's...
Backdoor Roth IRA Still Available After The Tax Reform
Good news. The Tax Reform (TCJA) did not harm the backdoor Roth strategy. Do not miss tax free growth - over 40 year period 94% of your account balance is due to growth and only 6% is due to contributions. First, as you likely know, the Roth IRA is a terrific way to...
IRS Creates a New “Safe Harbor” for Section 199A Rental Properties
Under the trade or business rule, your rental property profits can create the deduction. And now, under an alternative rule, you can use the newly created IRS safe harbor to make your rentals qualify for the deduction. When you meet the new safe-harbor rules, the IRS...
When the Second Office in the Home Is a Principal Place of Business
Over the years, we’ve come across many small-business owners and tax advisors who believe that a home office is not deductible unless it’s the only place of business. The IRS says "you can have more than one business location, including your home for a single trade or...
IRS Issues Final Section 199A Regulations and Defines QBI
Qualified business income (QBI) deduction is available for a sole proprietorship, partnership, S corporation, and certain trusts, estates, and rental properties. The tax code says QBI includes the net dollar amount of qualified items of income, gain, deduction, and...
Home-office Tax Benefits Require No Cash Outlay
Why is the home-office deduction so important? Is it really that different from other business deductions? The answer is YES! Two Reasons There are two reasons why this deduction is important for every single business owner and is in a class of its own:1. It’s...
Defining “Real Estate Investor” and “Real Estate Dealer”
The first good news is that you can be both real estate investor and real estate dealer with respect to your real estate portfolio. The next good news is that you are in control, and by knowing just a few rules about dealer and investor classifications, you can do...
Audit-Proof Your Time Spent on Rental Properties
Today’s tax law puts your income and deductions into three separate buckets for tax purposes. Each bucket has its own rules and regulations. These are the three buckets: active, passive and portfolio. A real estate rental is automatically in the passive bucket if you...
Defeat the Kiddie Tax after Tax Reform
For 2018–2025, the TCJA tax reform changes the kiddie tax rules to tax a portion of an affected child’s or young adult’s unearned income at the federal income tax rates paid by trusts and estates. Trust tax rates can be as high as 37 percent or, for long-term capital...
Avoid the 1099 Prepaid Rent Mismatch
Business rent payments to your landlord are reported on IRS Form 1099-MISC, which is due January 31. For the 1099-MISC, do you simply look at your checkbook or payment ledgers to identify the amounts you are going to report? If so, you will create an incorrect 1099...
Answers to Common Section 199A Questions
The Section 199A tax deduction is complicated, and many questions remain unanswered even after the IRS issued its proposed regulations on the provision. And to further complicate matters, there’s also a lot of misinformation out there about Section 199A. Below are...