You have tax decisions to make every year when you own a vacant lot and/or unproductive land. It starts with what you can or cannot deduct as itemized deductions. You need to consider the 2 percent floor on miscellaneous itemized deductions and the alternative minimum tax (AMT). If you can’t deduct some or all of the costs, then you can capitalize them by making a formal election in your tax return.
Take advantage of the government’s tax-free $250,000 home-sale-profit exclusion ($500,000 if married) by selling your home to an S corporation that you establish. This gives you two things: (1) tax-free income and (2) a step-up in basis for the rental house.
Tax law grants tax-free income status to the proceeds you receive from income replacement disability insurance policies. You pay a price for this tax-free income: You may not deduct the premiums. Special treatment applies to overhead disability, and there’s also special treatment for S corporation payments on behalf of “more than 2 percent” shareholders.
Renting equipment to your corporation requires knowledge of the tax laws. If you as a non-corporate lessor want Section 179 expensing, you need to comply with three special rules. If you can’t comply, you may obtain the benefits of Section 179 in other ways as we explain or simply stay with the rental without using Section 179.
Your business motor home is either a lodging facility, like a hotel, or a transportation vehicle. As a vehicle, it can qualify for Section 179 expensing, but you likely want to avoid that and take the easy road with MACRS depreciation.
When you sell a business, you and the buyer may structure a contingency that can vary the selling price. The tax code gives you three basic reporting possibilities for contingent prices, and, of course, the three possibilities give you planning opportunities.
Your claim to Section 179 expensing comes with strings. You make a deal with the government to keep your business use above 50 percent during the depreciation periods for the assets that you expensed. Should you violate your agreement, and depending on when you did that, the government can show up and recapture a big chunk of your Section 179 expensing.
Did you get big tax deductions using Section 179 expensing and/or bonus depreciation on your vehicle purchases in 2012, 2013, 2014, and/or 2015? If so, you now have a vehicle with a low adjusted basis. That gives you a tax problem when you sell the vehicle. To lessen and possibly eliminate the problem, use a Section 1031 tax-deferred exchange.
The tax implications for your office building and rentals have changed. Now when you fix up and improve those buildings, you need to be alert to additional savings that were not available in some prior years. Further, if you are buying a new building, you absolutely need to examine how you can create deductions where none existed before.
The IRS is pursuing taxpayers with foreign accounts and activities. You are likely aware of the FBAR and Form 8939 filing requirements, but the tax code has many other lesser-known required filings that carry large penalties for non-filing. Get onboard now. Learn the tax code’s requirements and how you might fix noncompliance and avoid huge penalties.
Using an S corporation to avoid self-employment taxes is a terrific strategy. But things can go very wrong if you use it the wrong way. When you earn income as an individual and then assign that income to your corporation, the IRS will make you regret the day you implemented that strategy.
Tax laws and regulations are not known for their clarity. That’s why it’s so surprising how clear the IRS made its regulations on foreign business travel. Even more surprising, the regulations actually work in your favor! If you know what you’re doing, you can deduct most, if not all, of your costs associated with foreign business travel. And the best part: you need not work very hard.
You likely feel some pain when you lose a rental property to foreclosure. And if you have the mortgage structured wrong, tax law adds to whatever pain you experienced with the lender. But in the right circumstances, you can lose your rental property to foreclosure and save money, too.
Get ready to thank the IRS. With the new tangible property regulations you can write off replaced components and achieve two types of tax savings. Before the new regulations, if you replaced a roof, you likely continued to depreciate the old roof and also depreciated the new roof. The old roof—the ghost roof—usually triggered additional recapture taxes. You are going to like the new rules, especially the two new types of tax savings.
If you are selling your S or C corporation, you have plenty to think about. And of course, the buyer has much to think about too. By using an election in the tax code, you and the buyer can get on the same page so you can sell with one level of taxation and also give the buyer what the buyer wants most—a step-up in basis of the assets acquired.
Do you claim the home-office deduction? If so, did you claim zero depreciation on the office so you could avoid the recapture tax? If yes, you need to spend a few minutes with this article to see whether that zero depreciation on the home office was a good idea or not.
What happens if you die? Or, in particular, what happens if you own an S corporation with others and one owner dies? Will you want to deal with the heirs? If not, how will you pay off the heirs? You might find the answer in an employer-owned life insurance policy, as discussed in this article.
You need to thank your lawmakers for the ability to claim your net operating loss (NOL) against income from other years. Think of it: tax deductions you incurred this year that exceeded your current-year taxable income turn into tax benefits, either immediately by carrying the NOL back or in the future by carrying the NOL forward. This article explains how this works, what you need to do, and how to see where you get the most dollars for your effort.
Health insurance premiums are rising at an astronomic rate. This is one of the biggest monthly expenses for many families. That’s where, because you are in business, a properly planned and executed Section 105 plan can work for you. This plan works like magic—it turns your medical expenses into tax-favored business expenses.
Few things can rock your world like the prospect of losing your home. In a foreclosure, the lender sends you one or two Form 1099s that will worry you too. The 1099s could show that you have cancellation of debt income (that’s taxable income). And then, just to pile on, the foreclosure that took away your home might trigger a taxable gain. That’s all bad news. But when you know the rules, you’ll see that you can make some or all of the bad-news tax problems go away.
If you and your spouse are the right ages, you can use one simple strategy to collect an EXTRA $50,000 or so in Social Security benefits. But it gets even better: while you’re collecting this additional amount, your own Social Security benefits continue to grow for an even bigger payout! But to do this, you need to act immediately.
The tax rules for determining whether amounts you spend on your rental properties are for improvements (which you must capitalize) or repairs and maintenance (which you can expense) are complicated. But if you qualify as a small business, the IRS has a possible gift for you in the form of hassle-free and income-generating safe-harbor expensing.
If you want to claim retroactively enacted bonus depreciation on ALL the qualifying assets you purchased during the year, smile. But if you don’t want that extra 50 percent depreciation on some or all of the assets, you need to take action on your tax return to avoid phantom depreciation and its very ill effects.
If you sold your home using seller financing, you likely don’t look forward to your buyer defaulting on your loan. Here’s a twist: It may not be a bad thing in the end. Under the right circumstances, you could walk away with more cash in your pocket—and you could make some or all of that cash tax-free! But there’s one big trap that you need to avoid.
In IRS Notice 2015-17, the IRS allowed S corporation owners in 2014 and 2015 to avoid the $100-a-day penalties on S corporation reimbursements of individually purchased health insurance and on providing insurance for the owners only. But 2016 is a new year, so what is that status now?
Are you suffering from phantom depreciation? This is when the tax law is depreciating your vehicles and other assets without giving you any deductions. Pretty outrageous, right? You suffer this when you fail to elect out of bonus depreciation. In this article, we show you how to fix bonus depreciation problems and also recoup a missed Section 179 deduction.
When you sell your business, you face two types of federal income taxes: (a) regular and (b) capital gains. Capital gains are better—much better. If you sell the assets rather than the business interest, your sale of self-created intangibles likely produces capital gains. Of course, the best bet is to sell the business interests rather than the assets, assuming you operate as other than a proprietorship, which can sell assets only.
It’s not unusual for small-business owners to fall behind in their tax return filings. Often taxpayers fail to file in one year and then multiply that one year into several years of unfiled returns. In this article, we give you a road map for getting your individual, corporate, and payroll taxes IRS-compliant with as little tax as possible and the fewest penalties possible.
If you own an S corporation, you can provide your employees with all sorts of tax-free fringe benefits. Things get a bit more complicated if that employee is your spouse. But don’t fret—while some fringe benefits to your employee-spouse are off-limits, you still have a large selection of benefits you can take advantage of.
Traditionally, tax rules put up major hurdles for small businesses seeking deductions for items such as furniture, computers, smartphones, and tablets. Now the IRS has made an important change that allows all businesses that have the right expense policy in place to elect expensing of these assets. This is a new and important change for 2016 and beyond, but you need to act fast to get this in place.
Don’t let the home mortgage interest deduction rules surprise you by disallowing your tax deductions. This can happen in two places: your regular tax computation and/or the computation of the alternative minimum tax (AMT). But when you know the mortgage interest rules, you can plan to mitigate and often eliminate the loss of your mortgage interest tax deductions.
You may have rental property with a tenant who is behind in his rent payments. A commonly asked question is how to account for this “lost income” if you don’t expect to recover it—ever. Another common question is whether you can still get the benefit of the usual tax deductions associated with rental property during that period for which the tenant hasn’t paid you. This article clears the dust on this important issue and shows you exactly how to record your income and expenses in this all-too-familiar scenario.
If you stash money in a Swiss bank account, you probably count on the bank to keep the account confidential. But the famed secrecy of Swiss bank accounts is rapidly crumbling, putting you at risk of staggering IRS penalties. You can put your money in a Swiss bank or in any foreign bank or entity. That’s not a problem. But not reporting those accounts to the feds is a major problem.
When it comes time to sell your business, you likely will face questions about selling the assets only. In this type of sale, you need to carefully consider the fair values of the assets you are selling and what you can do to influence those prices. You need to know how the law taxes each of the assets, including the hit you get from your previous depreciation deductions. The good news is that with this knowledge you can reduce the taxes and collect more after-tax cash.