Our Accounting Articles
Thinking of Donating a Vehicle? Better Double Check the Charity’s Intent
June 2, 2015
Thinking of Donating a Vehicle? Better Double Check the Charity’s Intent
If you donate your vehicle, the value of your deduction can vary greatly depending on what the charity does with it. You can deduct the vehicle’s fair market value (FMV) if the charity: read more…
Considering an ESA? You Should if You Expect to Be Paying for Elementary or Secondary School
May 26, 2015
As the school year draws to a close, it’s a good time to think about Coverdell Education Savings Accounts (ESAs) — especially if you have young children.
One major advantage of ESAs over another popular education saving tool, the Section 529 plan, is that tax-free ESA distributions aren’t limited to college expenses; they also can fund elementary and secondary school costs. That means you can use ESA funds to pay for such qualified expenses as tutoring and private school tuition.
Here are some other key ESA benefits: read more…
You’re a Real Estate Investor, But Are You a “Professional?”
May 19, 2015
Income and losses from investment real estate or rental property are passive by definition — unless you’re a real estate professional. Why is this important? Passive income may be subject to the 3.8% net investment income tax (NIIT), and passive losses are deductible only against passive income, with the excess being carried forward.
To qualify as a real estate professional, you must annually perform:
- More than 50% of your personal services in real property trades or businesses in which you materially participate, and
- More than 750 hours of service in these businesses during the year.
Each year stands on its own, and there are other nuances. If you’re concerned you’ll fail either test and be subject to the 3.8% NIIT or stuck with passive losses, consider increasing your hours so you’ll meet the test. (Special rules for spouses may help.) Also, be aware that the IRS has successfully challenged claims of real estate professional status in instances where the taxpayer didn’t keep adequate records of time spent.
If you’re not sure whether you qualify as a real estate professional, please contact us. We can help you make this determination and guide you on how to properly document your hours.
© 2015 Thomson Reuters/Tax & Accounting
100% Deduction for Certain Meal and Entertainment Expenses!
May 12, 2015
Here’s to 100% deductable M&E!
Generally, businesses are limited to deducting 50% of allowable meal and entertainment (M&E) expenses. But certain expenses are 100% deductible, including expenses:
- For food and beverages furnished at the workplace primarily for employees,
- Treated as employee compensation,
- That are excludable from employees’ income as de minimis fringe benefits,
- For recreational or social activities for employees, such as holiday parties, or
- Paid or incurred under a reimbursement or similar arrangement in connection with the performance of services.
If your company has substantial M&E expenses, you can reduce your tax bill by separately accounting for and documenting expenses that are 100% deductible. If doing so would create an administrative burden, you may be able to use statistical sampling methods to estimate the portion of M&E expenses that are fully deductible. For more information on how to take advantage of the 100% deduction, please contact us.
© 2015 Thomson Reuters/Tax & Accounting
Got ISOs? Tips to Help You to Understand Their Tax Treatment
May 5, 2015
Incentive stock options allow you to buy company stock in the future at a fixed price equal to or greater than the stock’s fair market value on the grant date. If the stock appreciates, you can buy shares at a price below what they’re then trading for.
ISOs must comply with many rules but receive tax-favored treatment:
- You owe no tax when ISOs are granted.
- You owe no regular income tax when you exercise ISOs.
- If you sell the stock after holding the shares at least one year from the exercise date and two years from the grant date, you pay tax on the sale at your long-term capital gains rate. You also may owe the 3.8% net investment income tax.
- If you sell the stock before long-term capital gains treatment applies, a “disqualifying disposition” occurs and any gain is taxed as compensation at ordinary-income rates.
There also might be alternative minimum tax consequences in certain situations. If you’ve received ISOs, contact us. We can help you determine when to exercise them and whether to immediately sell shares received from an exercise or to hold them.
© 2015 Thomson Reuters/Tax & Accounting
Now’s the Time to Begin Your 2015 Tax Planning
April 28, 2015
Just when you thought you could take a break from your taxes….nope.
Whether you filed your 2014 income tax return by the April 15 deadline or filed for an extension, you may think that it’s a good time to take a break from thinking about taxes. But doing so could be costly. Now is actually the time you should begin your 2015 tax planning — if you haven’t already. read more…