Seems like many of our younger clients had children last year- under the current tax law (2020) babies bring $2,000 child credits to your tax returns (credits reduce the bill dollar-for-dollar) and it doesnt matter what time of the year your children are born! This is a yearly credit until your daughter or son turns 17 (then drops to $500) Note- the credit begins to disappear as AGI rises above $200,000 for single and head-of-household and $400,000 on joint returns. For lower income folks part of this is ‘refundable’ along with other potential credits. We are anticipating changes for tax year 2021 under the new Biden tax plan proposed… Stay Tuned! Questions?
Author: Rob Tamburri
Know your payroll company!
These stories are becoming more frequent. Clients are ultimately responsible for the tax dollars which are due, along with the reporting and filing requirements. Its reminder that business owners must understand and know who their vendors are – fraud can happen at various levels of an organization. We can help connect you to qualified third parties.
Balog + Tamburri, CPAs expands to Dixie County, FL – Cross City Office Opens
The Florida practice of Balog + Tamburri, CPAs has acquired another accounting practice in Cross City, Dixie County, Florida. The new office will practice as Balog + Hodges, CPAs. This expansion now provides our Firm coverage from Central Florida into South Georgia and the Greater Atlanta Area. Rick Balog, CPA, will serve as the Managing Partner for Balog + Hodges, CPAs practice which is located at 85 NE 126th St, Cross City, FL 32628. The direct line to the office is (352) 498-0723.
Anne G. Hodges, CPA the former owner of Anne G. Hodges, CPAs will stay on board throughout the transition and will remain as a member of the professional staff as an independent contractor. Anne G. Hodges, CPAs has served the Cross City and Dixie County residents and business community since 1988, oddly, the same year what is now Balog + Tamburri, CPAs began in Jacksonville, FL.
Rick Balog says, “I am very excited about this expansion. Dixie County, FL is located where the Suwannee River meets the Gulf of Mexico. It is a sportsman’s paradise. In addition, the growth potential for Dixie County is tremendous. We see nothing but upside in this area for both businesses and the vacation home industry! Land is very affordable and access to water sports is unlimited. We are looking forward to serving and being an integral part of this community.”
Relationships and ideas don’t grow by chance – they flourish as a result of hard work and mindful nurturing. Balog + Hodges CPA’s strive to create an environment where professional relationships can prosper together. As your “Partner in Success,” our CPAs guide you toward your long-term goals, while always focusing on your short-term needs. We help you meet the challenges presented by your specialized accounting needs. Our ProfitPlus Total Back Office Support services everything from on site or remote bookkeeping services, QuickBooks Advisory services, total business and income tax planning and tax preparation, to or Virtual CFO Accounting services. We work with your “circle of experts,” including your staff, attorneys, bankers, and financial advisors. As your CPA Firm, Balog + Hodges gives you total peace of mind.
To schedule an appointment with Rick for either personal or business tax and accounting needs, please call the office at (352) 498-0723, or feel free to contact Rick directly at (904) 945-1220. We look forward to exceeding your expectations!
2018 Year End Charity Planning
As we enter the holiday season, please be reminded that cash and in-kind donations are deductible with specific rules up to 60% of a taxpayers AGI (up from 50%). To claim a deduction for a cash, check or other monetary gift you must have a written confirmation from the charity. This typically would include name of organization, date and amount of the gift. Charities are required to provide written acknowledgement for donations over $250. (Contributions under this amount can rely on a bank record or canceled check) Please note any good or services received with any donation must be stated on the receipt.
Things to Consider
- Gift fund contributions must be established and funded in 2018 to qualify as a gift. (payments to charity can be made anytime)
- The large increase in standard deductions for 2018 may cause your charitable giving to be not deductible. Consider bunching these in 2018 or 2019 to maximize your tax benefit
- Evaluate the tax impact of gifting long-term appreciated stock vs cash
- If you are over 70 1/2 consider a qualified charitable distribution (QCD) from your IRA up to $100,000
- Charitable Gifts charged on your credit cards but not paid until 2019 are fully deductible
- Make gifts to individuals this holiday season. Each taxpayer can gift $15,000 this year ($30,000 if married) to any individual with no paperwork required
Corporations and Pass-Through Entities: Entity Selection: Fifth in a Series
The current tax reform has made business entity selection for new and existing businesses quite complicated for C corporations, and other pass-through businesses (think K1’s and Schedule C) There are tremendous factors based on your industry, size and structure of your organization.
C Corps which have been out of vogue in recent years to most businesses (and CPA entity choice) have gotten some new light, the new tax law reduces the maximum tax rate from 35% to now 21% flat. Remember that “distributions” in these entities are dividends, with a maximum tax of 23.8%, so hovering around 40% with the double tax.
Pass-Through Entities (S Corps and Partnerships) which now include Schedule C sole proprietors receive a new 20% deduction off qualified activity income, substantially reducing tax marginal levels near 31-32%.
Under prior law, most businesses benefited from the pass-through entity as it resulted in a lower tax rate. However, under the new code, special analysis must be conducted as major deductions have been eliminated or capped under the new individual code for 2018 going forward
The deduction for “qualified business income” appears to be straight forward at 20% of the income earned, however there are phase-outs, and how this is calculated based on your income and industry.
We often quote that simplicity can be expensive. It might be time to change your entity structure or break your business into new entities.
2018 Tax Cuts- Personal Exemptions and Child Credits- 4th In a Series
One of the big changes under the new code and candidly not spoken about in the press as much as the change in the “standard deduction” is the elimination of all personal exemptions under the new code. This has a potential substantial impact on larger, middle class families. These are worth $4,050 in 2017 per exemption and might offset the doubling of the standard deduction.
The child credit will now be $2,000 per qualifying child and up to $1,400 will be refundable – there are substantially higher thresholds for eligibility- good news for the middle and upper class. These amounts are now $400,000 ($200,000 single) up from $110,000 ($75,000) under 2017 law. This impacts children under age 17
The Act also provides a $500 nonrefundable credit for qualifying dependents other than children, and the dependent care credit, adoption credit and the ability to exclude up to $5,000 of gross income annually for employer-provided dependent care remains on the tax code books for 2018
We move to business matters in our next blog. We will start with an overview on business tax rates and important changes
2018 Tax Cuts- Third in a Series: You Itemize and File Schedule A
The substantial increase in the standard deduction for 2018, as previously posted, means that a larger number of taxpayers will now take the standard deduction in lieu of itemizing. Factoring in the limit on state and local property taxes and new reduced mortgage interest limits, lets see what else could cause an increase in standard deduction usage for 2018 and beyond.
Casualty and Theft Losses
No longer deductible unless they are related to a loss in a federally declared disaster area. (such as major storms such as hurricanes, wildfires and floods)
One of the few items that affects 2017 returns and for 2018 only, the threshold is reduced to 7.5% of AGI – for taxpayers planning surgery and can bunch these expenses its time to consider this before this reverts to 10% of AGI effective 2019 tax year
State and Local Taxes
These taxes are now capped at $10,000. Same regardless if you are single or married. (substantial reduction to many taxpayers)
Completely eliminated under the code. This includes all reimbursed business expenses (meals, mileage etc), tax prep, fees, investment management fees. Sales people with substantial business miles need to factor this change immediately in their compensation packages
Employees and business owners heed: The ability to deduct business meals and entertainment has now been eliminated starting this year as this was previously 50% deductible.
Child Tax Credits/Personal Exemptions will be our next blog topic.
2018 Tax Cuts and Jobs Act- Individual and Business Tax Forum Series- “You’re Buying (or Selling) a Home
For taxpayers with existing mortgages you can currently deduct mortgage interest of up to 1,000,000 (500,000 married separate) of incurred debt. Under the new Code, mortgages taken out between December 15,2017 and December 31, 2025 are now only eligible for an interest deduction on their mortgage of up to $750,000 ($375,000 married separate). Note: If you have a binding contract signed before December 15, 2017 and close on the home no later than April 1, 2018 the old rules apply to you.
Prior to the new Code, interest on Home Equity loans of up to $100,000 has been fully deductible. The new rules have eliminated this deduction on all HELOC loans, including existing loans already in place.
The impact on home sales is unclear at this point, we anticipate that the potential decline in pricing in urban areas could be offset by the reduction of sellers who keep their homes to avoid the new rules
The tax free sale of primary homes is a great benefit in the current code, married couples can exclude up to $500,000 ($250,000 single) from their income taxes as long as the home is their residence for at least two of the last five years. There was much debate about changing this to five of the last eight years but this was not passed. This benefit remains in place.
Next blog will talk about the impact on itemized deductions overall on your form Schedule A
2018 Tax Cuts and Jobs Act- Individual and Business Tax Forum Series- “You Own a Home”
The new tax law that President Donald Trump signed into law late December 2017 will have massive, sweeping impacts on both the individual and business taxpayer. We are beginning to digest the new code. The changes involve so many parts of the code that the tax affect for each taxpayer has the potential to be profoundly different based on children, types of income, local taxes and more. We will highlight highly impact areas over a series of blog posts to help explain specifics to our clients and readers.
You Own a Home
If you live in a high-tax area you will be especially affected by a new $10,000 limit on local and state taxes you can deduct on your Schedule A.
For our clients in FL, unless you are in a very expensive area you potentially will not feel any pain in this area, but our Atlanta clients in high-taxed areas of Decatur, along with large homes in Fulton County plus 6% GA state income taxes will feel the pinch.
This blog is about currently owning a home, so your current primary mortgage interest deductions won’t be affected, but if you are considering a move, that will be changes that you need to consider (another blog). Note that fewer people will itemize, though since the new standard deduction has been increased substantially.
Taxpayers that are single (and married separately) will see this rise from $6,350 to $12,000, head of household jumps from 9,350 to 18,000, and married filing jointly folks go from $12,700 to now $24,000.
Homeowners, starting with tax year 2018, will also lose their ability to deduct the interest on home-equity loans .
Our next blog will talk about the changes in buying and selling a home and the impact on new mortgages and holding periods on sales of your primary residence
Trump Child Care/Elder Care Expenses
We have been fielding many questions from clients and the community about what we expect under the new Trump Administration. Although it will be early 2017 before we get any specifics on the future pending legislation, Trump has made various announcements about the scope of his overall tax plan- which will be of similiar magnitude of the Tax Reform Act of 1986. In the first of a few posts- child care expenses are of a great concern to many of our clients. Key highlights include:
- New Above-the-Line deduction and a new tax-preferred savings account to encourage families to set aside funds for caregiving expenses
- New Above-the-Line Deduction will now cover up to four (4) children per family from birth to age 13 with the deduction capped at “the average cost of child care” based on he child’s age and state of residence. The deduction would be available to itemizers and non-itemizers and would apply to families that use paid child care providers as well as families that rely of a stay-at-home parent or unpaid relative to meet their child care needs
- The deduction would be limited to couples earning up to $500,000 a year and individuals earning up to $250,000.
- Familys will no income tax liability will potentially receive assistance though a “spending rebate” through the earned income tax credit capped at “half the payroll taxes paid by the taxpayer” (lower earning parent) and subject to a limitation of $31,200 for an individual or $62,400 for joint filers.
- A similar above-the-line deduction would be available for home care or adult day care for elderly dependent relatives – current proposed would be a cap of $5,000 a year, indexed for inflation.
These proposals are a major change from the current code which offers a small tax credit of based on spending of up to $3,000 per child, max of $6,000 subject to declining percentages.
Source: Deloitte- 2017 essential tax and wealth planning guide