Archives for March 2018

2% MISCELLANEOUS TAX DEDUCTIONS – WILL YOUR TAXES INCREASE?

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Effective with the 2018 tax year, the Tax Cut and Jobs Act (ACT) reduced the allowable deductions for individual taxpayers who itemized their deductions on Schedule A. (Note: If you did not itemize but claimed the standard deduction, the ACT will definitely benefit you). One of the changes that will reduce allowable itemized deductions is the repeal of the 2% miscellaneous tax deduction. These deductions were referred to as the 2% miscellaneous tax deductions because the taxpayer was only allowed a deductions if such deductions exceeded 2% of the reported adjusted gross income (AGI) shown on the taxpayer’s Form 1040.

The typical miscellaneous 2% tax deductions were [Read more…] about 2% MISCELLANEOUS TAX DEDUCTIONS – WILL YOUR TAXES INCREASE?

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HAVE YOUR PARENTS’ U.S. TREASURY BONDS MATURED?

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HAVE YOUR PARENTS’ U.S. TREASURY BONDS MATURED?

Many persons complain about the very low interest that money market accounts pay. While that is of concern, how many persons hold U.S. treasury bonds that have matured? Do they realize that these bonds, once they have matured, pay zero interest?

In addition to checking your own portfolio, be sure to check with your parents and other elderly family members who may be on a fixed income to make sure that they are not holding bonds that are not throwing off any income.

The U.S. Treasury has a Savings Bond Calculator on its website that calculates the final maturity date, reflects current interest rate being earned, the next accrual date for payment of interest, and year-to-date interest earned.

To learn more about U.S. Treasury Bond Planning, we suggest [Read more…] about HAVE YOUR PARENTS’ U.S. TREASURY BONDS MATURED?

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Why Holding Real Estate in a C Corporation Is a (VERY) Bad Idea

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Classic Example of Double-Taxation with C Corps

 

Holding real estate in a C Corporation (or an LLC taxed as a C Corporation) is generally a very bad idea from a tax perspective.

Let’s assume the following facts:

  • C Corp purchases real estate for $100,000 or owner/shareholder contributes $100,000 of real estate to a C Corp
  • No capital improvements are made
  • Real estate appreciates to $1,250,000
  • The C Corp. has a taxable gain of $1,150,000 (sales proceeds of $1,250,000 less tax basis of $100,000)
  • The Corp has a tax liability of $241,500 (21% of taxable gain).
  • The Corp has slightly over a $1 million in its bank account that the shareholder wishes to invest in the stock market. The Corp distributes $1 million to the shareholder.
  • The shareholder has received a taxable dividend distribution from the C Corp. The owner reports the $1,000,000 of dividend income and let’s assume that s/he files as married filing jointly. This income, subject to tax at the capital gains rate (20%) as well as being subject to the net investment income tax of 3.8%, would result in an additional tax liability of $238,000.

[Read more…] about Why Holding Real Estate in a C Corporation Is a (VERY) Bad Idea

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