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Hal Zemel, CPA, J.D., LL.M.

Hal Zemel, CPA, J.D., LL.M.
Hal Zemel, a Tax Principal at Berdon LLP, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.
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TAX TALK: Donating Appreciated Stock Yields Twice the Tax Benefits

Posted by Hal Zemel, CPA, J.D., LL.M. on Nov 12, 2018 9:20:00 AM

A tried-and-true year end tax strategy is to make charitable donations. As long as you itemize and your gift qualifies, you can claim a charitable deduction. But did you know that you can enjoy an additional tax benefit if you donate long-term appreciated stock instead of cash?

2 Benefits from 1 Gift

Appreciated publicly traded stock you’ve held more than one year is long-term capital gains property. If you donate it to a qualified charity, you may be able to enjoy two tax benefits:

  1. If you itemize deductions, you can claim a charitable deduction equal to the stock’s fair market value, and
  2. You can avoid the capital gains tax you’d pay if you sold the stock.

Donating appreciated stock can be especially beneficial to taxpayers facing the 3.8% net investment income tax (NIIT) or the top 20% long-term capital gains rate this year.

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Topics: TAX TALK

TAX TALK: Bunching Medical Expenses into 2018 May Save You Tax

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 29, 2018 9:20:00 AM

Some of your medical expenses may be tax deductible, but only if you itemize deductions and have enough expenses to exceed the applicable floor for deductibility. With proper planning, you may be able to time controllable medical expenses to your tax advantage. The Tax Cuts and Jobs Act (TCJA) could make bunching such expenses into 2018 beneficial for some taxpayers. At the same time, certain taxpayers who’ve benefited from the deduction in previous years might no longer benefit because of the TCJA’s increase to the standard deduction.

The Changes

Various limits apply to most tax deductions, and one type of limit is a “floor,” which means expenses are deductible only to the extent that they exceed that floor (typically 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. The TCJA reduced the floor for the medical expense deduction for 2017 and 2018 from 10% to 7.5%. So, it might be beneficial to bunch deductible medical expenses into 2018.

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Topics: TAX TALK

TAX TALK: Weigh the Tax Consequences before Gifting Loved Ones

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 22, 2018 9:20:00 AM

Many people choose to pass assets to the next generation during their lifetime, to reduce the size of their taxable estate, to help out family members, or simply to see their loved ones enjoy the gifts. If you’re considering lifetime gifts, be aware that which assets you give can produce substantially different tax consequences.

Multiple Types of Taxes

Federal gift and estate taxes generally apply at a rate of 40% to transfers in excess of your available gift and estate tax exemption. Under the Tax Cuts and Jobs Act, the exemption has approximately doubled through 2025. For 2018, it’s $11.18 million (twice that for married couples with proper estate planning strategies in place).

Even if your estate isn’t large enough for gift and estate taxes to currently be a concern, there are income tax consequences to consider. Plus, the gift and estate tax exemption is scheduled to drop back to an inflation-adjusted $5 million in 2026.

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Topics: TAX TALK

TAX TALK: Tax-free Fringe Benefits Help Retain Best Employees

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 15, 2018 7:00:00 AM

In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay, but also appealing fringe benefits. Benefits that are tax-free are especially attractive to employees. Let’s take a quick look at some popular options.

Insurance

Businesses can provide their employees with various types of insurance on a tax-free basis. Here are some of the most common:

Health Insurance. If you maintain a health care plan for employees, coverage under the plan isn’t taxable to them. Employee contributions are excluded from income if pretax coverage is elected under a cafeteria plan. Otherwise, such amounts are included in their wages, but may be deductible on a limited basis as an itemized deduction.

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Topics: TAX TALK

TAX TALK: Charitable IRA Rollovers may be Especially Beneficial in 2018

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 8, 2018 9:20:00 AM

If you’re age 70½ or older, you can make direct contributions — up to $100,000 annually — from your IRA to qualified charitable organizations without owing any income tax on the distributions. This break may be especially beneficial now because of Tax Cuts and Jobs Act (TCJA) changes that affect who can benefit from the itemized deduction for charitable donations.

Counts toward your RMD

A charitable IRA rollover can be used to satisfy required minimum distributions (RMDs). You must begin to take annual RMDs from your traditional IRAs in the year you reach age 70½. If you don’t comply, you can owe a penalty equal to 50% of the amount you should have withdrawn but didn’t. (Deferral is allowed for the initial year, but you’ll have to take two RMDs the next year.)

So if you don’t need the RMD for your living expenses, a charitable IRA rollover can be a great way to comply with the RMD requirement without triggering the tax liability that would occur if the RMD were paid to you.

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Topics: TAX TALK

TAX TALK: TCJA Made Tax Planning for Investments More Complex

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 1, 2018 9:20:00 AM

For investors, fall is a good time to review year-to-date gains and losses. Not only can it help you assess your financial health, but it also can help you determine whether to buy or sell investments before year end to save taxes. This year, you also need to keep in mind the impact of the Tax Cuts and Jobs Act (TCJA). While the TCJA didn’t change long-term capital gains rates, it did change the tax brackets for long-term capital gains and qualified dividends.

For 2018 through 2025, these brackets are no longer linked to the ordinary-income tax brackets for individuals. So, for example, you could be subject to the top long-term capital gains rate even if you aren’t subject to the top ordinary-income tax rate.

Old Rules

For the last several years, individual taxpayers faced three federal income tax rates on long-term capital gains and qualified dividends: 0%, 15% and 20%. The rate brackets were tied to the ordinary-income rate brackets.

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Topics: TAX TALK

TAX TALK: TCJA Changed Rules for Deducting Pass-Through Business Losses

Posted by Hal Zemel, CPA, J.D., LL.M. on May 29, 2018 9:40:30 AM

It’s not uncommon for businesses to sometimes generate tax losses. But the losses that can be deducted are limited by tax law in some situations. Beginning in 2018, the Tax Cuts and Jobs Act (TCJA) further restricts the amount of losses that sole proprietors, partners, S corporation shareholders and, typically, limited liability company (LLC) members can currently deduct. This could negatively impact owners of start-ups and businesses facing adverse conditions.

Before the TCJA

Under pre-TCJA law, an individual taxpayer’s business losses could usually be fully deducted in the tax year when they arose unless:

  • The passive activity loss (PAL) rules or some other provision of tax law limited that favorable outcome, or
  • The business loss was so large that it exceeded taxable income from other sources, creating a net operating loss (NOL).
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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

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