TAX TALK: Hire Your Children This Summer: Everyone Wins

Posted by Hal Zemel, CPA, J.D., LL.M. on May 28, 2019 9:20:00 AM

If you’re a business owner and you hire your children (or grandchildren) this summer, you can obtain tax breaks and other nontax benefits. The kids can gain on-the-job experience, save for college and learn how to manage money. And you may be able to:

  • Shift your high-taxed income into tax-free or low-taxed income,
  • Realize payroll tax savings (depending on the child’s age and how your business is organized), and
  • Enable retirement plan contributions for the children.

It Must Be a Real Job

When you hire your child, you get a business tax deduction for employee wage expenses. In turn, the deduction reduces your federal income tax bill, your self-employment tax bill (if applicable), and your state income tax bill (if applicable). However, in order for your business to deduct the wages as a business expense, the work performed by the child must be legitimate and the child’s salary must be reasonable.

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Topics: TAX TALK

T&E TALK: The Danger of Leaving Specific Assets to Specific Heirs

Posted by Scott T. Ditman, CPA/PFS on May 28, 2019 7:00:00 AM

Planning your estate around specific assets is risky and, in most cases, should be avoided. If you leave specific assets — such as homes, cars, or stock — to specific people, you may inadvertently disinherit them.

Here’s The Problem

Let’s say Debbie has three children — Abbie, Mary Kate, and Lizzie — and wishes to treat them equally in her estate plan. In her will, Debbie leaves a $500,000 mutual fund to Abbie and her home valued at $500,000 to Mary Kate. She also names Lizzie as beneficiary of a $500,000 life insurance policy.

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Topics: T&E TALK

SALT TALK: NYS Tax Department Confirms You Can’t Take it With You When You Go

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on May 20, 2019 11:30:00 AM

By now, my loyal readers are all well versed in the rules of residency. We are all aware what a difference a day makes and just as aware that days (specifically 184) are far from the only issue in determining residency status. The domicile test, separate and apart from the mechanical day counting attached to the statutory residency test, in and of its own can make you a resident.

New York has a highly developed as well as entertaining fact-specific body of case law examining the nuances attached to domicile determination. The most amusing of these tirades through the most intimate details of one’s personal life tend to revolve around the location of near and dear items.

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TAX TALK: Tax Considerations When Selling Your Home

Posted by Hal Zemel, CPA, J.D., LL.M. on May 20, 2019 9:20:00 AM

Spring and summer are the optimum seasons for selling a home. And interest rates are currently attractive, so buyers may be out in full force in your area. Freddie Mac reports that the average 30-year fixed mortgage rate was 4.14% during the week of May 2, 2019, while the 15-year mortgage rate was 3.6%. This is down 0.41 and 0.43%, respectively, from a year earlier.

But before you contact a realtor to sell your home, you should review the tax considerations.

Sellers Can Exclude Some Gain

If you’re selling your principal residence, and you meet certain requirements, you can exclude up to $250,000 ($500,000 for joint filers) of gain. Gain that qualifies for the exclusion is also excluded from the 3.8% net investment income tax.

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Topics: TAX TALK

T&E TALK: Make Health Care Decisions While You’re Healthy

Posted by Scott T. Ditman, CPA/PFS on May 20, 2019 7:00:00 AM

Estate planning isn’t just about what happens to your assets after you die. It’s also about protecting yourself and your loved ones. This includes having a plan for making critical medical decisions in the event you’re unable to make them yourself. And, as with other aspects of your estate plan, the time to act is now, while you’re healthy. If an illness or injury renders you unconscious or otherwise incapacitated, it will be too late.

Without a plan that expresses your wishes, your family may have to make medical decisions on your behalf or petition a court for a conservatorship. Either way, there’s no guarantee that these decisions will be made the way you would want, or by the person you would choose.

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Topics: T&E TALK

SALT TALK: New Internet Taxes and Wayfair? Don’t Forget the Use Tax

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on May 13, 2019 11:30:00 AM

Many science fiction adventures have posited the idea of a parallel universe, but to my knowledge, we have not found intelligent life out there yet. Readers don’t fret. If you had your heart set on discovering a parallel universe, just take the lead of state government. Go out and create your own.

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T&E TALK: Does your Estate Plan Include a Formula Funding Clause?

Posted by Scott T. Ditman, CPA/PFS on May 13, 2019 7:00:00 AM

The gift and estate tax exemption is higher than it’s ever been, thanks to the Tax Cuts and Jobs Act (TCJA), which temporarily doubled the exemption to an inflation-adjusted $10 million ($20 million for married couples who design their estate plans properly). This year, the exemption amount is $11.4 million ($22.8 million for married couples).

If you’re married and you executed your estate planning documents years ago, when the exemption was substantially lower, review your plan to ensure that the increased exemption doesn’t trigger unintended results. It’s not unusual for older estate planning documents to include a “formula funding clause,” which splits assets between a credit shelter trust and the surviving spouse — either outright or in a marital trust.

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Topics: T&E TALK

TAX TALK: Plug into Tax Savings for Electric Vehicles

Posted by Hal Zemel, CPA, J.D., LL.M. on May 6, 2019 9:17:00 AM

While the number of plug-in electric vehicles (EVs) is still small compared with other cars on the road, it’s growing — especially in certain parts of the country. If you’re interested in purchasing an electric or hybrid vehicle, you may be eligible for a federal income tax credit of up to $7,500. (Depending on where you live, there may also be state tax breaks and other incentives.)

However, the federal tax credit is subject to a complex phaseout rule that may reduce or eliminate the tax break based on how many sales are made by a given manufacturer. The vehicles of two manufacturers have already begun to be phased out, which means they now qualify for only a partial tax credit.

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Topics: TAX TALK

T&E TALK: Single Parent? Estate Planning Requires Special Considerations

Posted by Scott T. Ditman, CPA/PFS on May 6, 2019 7:00:00 AM

Here’s a fast fact: The percentage of U.S. children who live with an unmarried parent has jumped from 13% in 1968 to 32% in 2017, according to Pew Research Center’s most recent poll.

While estate planning for single parents is similar to estate planning for families with two parents, when only one parent is involved, certain aspects demand your special attention.

5 Important Questions

Of course, parents want to provide for their children’s care and financial needs after they’re gone. If you’re a single parent, here are five questions you should ask:

  1. Have I selected an appropriate guardian? If the other parent is unavailable to take custody of your children should you become incapacitated or unexpectedly die, your estate plan must designate a suitable, willing guardian to care for them.
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Topics: TAX TALK

TAX TALK: Entrepreneurs: How to Treat Expenses on your Tax Returns

Posted by Hal Zemel, CPA, J.D., LL.M. on Apr 29, 2019 9:20:00 AM

Have you recently started a new business? Or are you contemplating starting one? Launching a new venture is a hectic, exciting time. And as you know, before you even open the doors, you generally have to spend a lot of money. You may have to train workers and pay for rent, utilities, marketing and more.

Entrepreneurs are often unaware that many expenses incurred by start-ups can’t be deducted right away. You should be aware that the way you handle some of your initial expenses can make a large difference in your tax bill.

Key Points on How Expenses are Handled

When starting or planning a new enterprise, keep these factors in mind:

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Topics: TAX TALK

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