Berdon Blogs

TAX TALK: Higher-Bracket Taxpayers can Take Advantage of 0% Long-Term Gains Rate

Posted by Michael Eagan, J.D., LL.M. on Dec 4, 2017 9:18:00 AM

We’re in the giving season, and if making financial gifts to your loved ones is part of your plans — or if you’d simply like to reduce your capital gains tax — consider giving appreciated stock instead of cash this year. Doing so might allow you to eliminate all federal tax liability on the appreciation, or at least significantly reduce it.

Leveraging Lower Rates

Investors generally are subject to a 15% tax rate on their long-term capital gains (20% if they’re in the top ordinary income tax bracket of 39.6%). But the long-term capital gains rate is 0% for gain that would be taxed at 10% or 15% based on the taxpayer’s ordinary-income rate.

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Topics: TAX TALK

TAX TALK: RMDs May Be On your Year End to-do List

Posted by Michael Eagan, J.D., LL.M. on Nov 27, 2017 9:20:00 AM

As the end of the year approaches, for taxpayers “of a certain age” with a tax-advantaged retirement account, as well as younger taxpayers who’ve inherited such an account, there may be one more thing that’s critical on your year end to do list: Take required minimum distributions (RMDs).

Risking a Huge Penalty

After you reach age 70½, you generally must take annual RMDs from your:

  • IRAs (except Roth IRAs), and
  • Defined contribution plans, such as 401(k) plans (unless you’re still an employee and not a 5%-or-greater shareholder of the employer sponsoring the plan).
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Topics: TAX TALK

TAX TALK: Accelerating Your Property Tax Payment into 2017 May Be Especially Beneficial

Posted by Michael Eagan, J.D., LL.M. on Nov 20, 2017 9:17:00 AM

Accelerating deductible expenses, such as property tax on your home, into the current year typically is a good idea. Why? It will defer tax, which usually is beneficial. Prepaying property tax may be especially beneficial this year, because proposed tax legislation might reduce or eliminate the benefit of the property tax deduction beginning in 2018.

Proposed Changes

The initial version of the House tax bill would cap the property tax deduction for individuals at $10,000. The initial version of the Senate tax bill would eliminate the property tax deduction for individuals altogether.

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Topics: TAX TALK

TAX TALK: 2017 Might be Your Last Chance to Hire Veterans and Claim a Tax Credit

Posted by Michael Eagan, J.D., LL.M. on Nov 13, 2017 11:40:00 AM

With Veterans Day just over, it’s an especially good time to think about ways we can support our veterans.  One way for businesses is to hire them. The Work Opportunity Tax Credit (WOTC) can help businesses do just that, but it may not be available for hires made after this year.

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Topics: TAX TALK

TAX TALK: Ins and Outs of Tax on “Income Investments”

Posted by Michael Eagan, J.D., LL.M. on Nov 6, 2017 11:35:00 AM

Many investors, especially those who are risk-averse, hold much of their portfolios in “income investments” — those that pay interest or dividends, with less emphasis on growth in value. But all income investments aren’t alike when it comes to taxes. So it’s important to be aware of the different tax treatments when managing your income investments.

Varying Tax Treatment

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Topics: TAX TALK

TAX TALK: Self-Employed Retirement Plans

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 30, 2017 9:17:00 AM

If you are self-employed you may be able to set up a retirement plan that allows you to contribute much more than you can contribute to an Individual Retirement Account (“IRA”) or even an employer-sponsored 401(k). There is still time to set up such a plan for 2017, and it generally is easy to do. So whether you are a “full-time” independent contractor or you are employed but earn some self-employment income on the side, consider setting up one of the following types of retirement plans this 2017.

Profit-sharing Plan

This is a defined contribution plan that allows discretionary employer contributions and flexibility in plan design. You can make deductible 2017 contributions as late as the due date of your 2017 tax return, including extensions — provided your plan exists on Dec. 31, 2017.

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Topics: TAX TALK

TAX TALK: Two ACA Taxes that May Impact Your Executive Compensation

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 23, 2017 12:19:09 PM

If you’re an executive or other key employee, you might be rewarded with restricted stock, stock options, or nonqualified deferred compensation (NQDC). Tax planning for these forms of executive compensation is generally more complicated than for salaries, bonuses, and traditional employee benefits. And planning gets even more complicated if you could potentially be subject to two taxes under the Affordable Care Act (ACA):

1) the additional 0.9% Medicare tax, and

2) the net investment income tax (NIIT)

These taxes apply when certain income exceeds the applicable threshold: $250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for other taxpayers.

Additional Medicare Tax

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Topics: TAX TALK

TAX TALK: Accelerate Your Retirement Savings with a Cash Balance Plan

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 16, 2017 9:18:00 AM

If you are a business owner, you may not be able to set aside as much as you’d like in tax-advantaged retirement plans. Typically, you’re older and more highly compensated than your employees, but restrictions on contributions to 401(k) and profit-sharing plans can hamper retirement-planning efforts. One solution may be a cash balance plan.

Defined Benefit Plan with a Twist

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Topics: TAX TALK

TAX TALK: Consider Bunching Your Medical Expenses for 2017

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 9, 2017 9:19:00 AM

Various limits apply to most tax deductions, and one type of limit is a “floor,” which means expenses are deductible only if they exceed that floor. Typically this is a specific percentage of your income. One example is the medical expense deduction.

Because it can be difficult to exceed the floor, a common strategy is to “bunch” deductible medical expenses into a particular year where possible. If tax reform legislation is signed into law, it might be especially beneficial to bunch deductible medical expenses into 2017.

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Topics: TAX TALK

TAX TALK: Investors - Beware of the Wash Sale Rule

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 2, 2017 9:18:00 AM

A tried-and-true tax-saving strategy for investors is to sell assets at a loss to offset gains that have been realized during the year. If you have cashed in some big gains this year, consider looking for unrealized losses in your portfolio and selling those investments before year end to offset your gains. This can reduce your 2017 tax liability.

But what if you expect an investment that would produce a loss if sold now to not only recover but thrive in the future? Or perhaps you simply want to minimize the impact on your asset allocation. You might think you can simply sell the investment at a loss and then immediately buy it back. Not so fast: You need to beware of the wash sale rule.

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Topics: TAX TALK

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