Individual Strategies Archives - Think Outside the Tax Box

Individual Strategies

By Matt Metras, EA

Joint vs. Separate Filing – New Advantages with the 2021 Stimulus

COVID-19 has affected every aspect of our lives, and tax filing status is no exception. Couples who have filed jointly for their entire marriage may find that for 2021 it is more beneficial to file separately. This is in large part thanks to the many stimulus bills the Congress passed in 2020 and 2021. The addition of Economic Impact Payments (EIP) and the associated Recovery Rebate Credits (RRC) have complicated what was once a simple tax calculation to now include these additional factors. In some scenarios, a couple would pay more tax filing separately than if they filed jointly, but because of pandemic-related credits, end up with more money in their pockets. Filing separately is not without its own potential headaches, though. Keep reading to find out when to switch your filing status.

READ MORE

To the Moon: Tax Saving Strategies for Meme Stocks

Think back to January 2021. A new President was sworn in; Twitter was obsessed with “Bean Dad,” and the term “Meme Stock” entered popular culture. A previously obscure subreddit called “Wall Street Bets” began making front page headlines. Average Americans took their “Stimmies” and invested them into unpopular companies, some on the verge of failure, and started making double digit percentage gains per day by pitting their collective holdings to short squeeze institutional investors. Companies that no analyst listed as a good buy, such as a retail video game store (retail is still a thing?), a movie theater chain (in the middle of a pandemic) and multiple cell phone companies (that don’t produce Apple or Android phones) all began to skyrocket overnight. As of this writing, GameStop Corp. ($GME) was up nearly 2000 percent in the last year. It’s likely while riding the adrenaline rollercoaster, most investors were not thinking about taxes. There are no taxes on the moon, but it’s not too late to plan for tax consequences here on Earth.

Read More

Wash Up for Tax Savings – Cryptocurrency and the Wash Loss Rule

When recognizing capital gains during a tax year, it can often make financial sense to sell assets that have lost value to offset profits in other investments or regular income. In this situation, you swap stocks, bonds, or mutual funds by buying a similar asset, selling the old asset and taking a loss. This strategy is called tax-loss harvesting, and it can be applied under certain circumstances which will lower your taxes. Yet while the tax deduction might seem appealing, you might have a hard time locking in that loss forever, and you may be inclined to repurchase the same investment in case the value rebounds. This strategy may appear brilliant on paper; however, the IRS doesn’t allow such manipulation just to reduce taxes. The Wash Loss Rule prevents traders from realizing a tax loss on a position that the taxpayer reacquires within 30 days after (or before) selling a security. But a little known loophole may allow you to complete a wash sale and claim your deduction without recognizing the loss forever as long as it is crypto. Cryptocurrency continues to be an area where the rules don’t always seem to make sense. Most experienced investors are already familiar with the “Wash Loss Rule,” while many newer investors have recently learned about it the hard way. To learn this valuable strategy for offsetting your capital gains while remaining in the investment gain for expected future growth, continue reading to learn more.

Read More

Office in the Home – Real Estate

As many of us become more accustomed to working from home, it is easy to forget that some industries were regularly working remotely prior to the COVID-19 pandemic. It might be easy to forget altogether that real estate businesses also qualify for the same deductions as other businesses. Yet, it is often easy to overlook something like a home office for a real estate rental operation, but the home office typically functions as the glue holding these businesses together. To learn more about the how and the where to grab this deduction, keep reading.

Read More

Conservation Easements: Good Execution Is the Key

If someone approaches your client offering four to one deductions on conservation easements (probably somewhere in the Southeast), you need to do your best to talk them out of it. And if you cannot, it may be best to let some other practitioner have the honor of preparing their return. On the other hand, if your client has land or a building they would like to preserve forever, a conservation easement may be just the thing. Assuming the desire to have the property preserved anyway, it is about as close to a free lunch as you can get. Good execution is the key to making it work. Read on to learn how!

Read More

Office in the Home – Partnerships

The COVID-19 pandemic has altered many aspects of our society, perhaps permanently. One of these is the need to physically go to the office to get work done. Like all businesses, partnerships are no exception. While the Tax Cuts and Jobs Act of 2017 (TCJA) suspended this deduction for employees of the partnership until 2025 . However, partners may still take advantage of this often-overlooked tax benefit. The key is in how to report it. Read on to learn how!

Read More

Office in the Home

2020 saw a huge increase in taxpayers working from home. A good internet connection can allow taxpayers in many industries to work almost anywhere. Whether it is because the typical workspace has closed or there’s a need to be home to care for a family member, the shift to working from home can come with substantial tax savings. Claiming the home office deduction allows the taxpayer to take a typically non-deductible expense and make it deductible, reducing the amount of income subject to tax. The most important item to note is the Tax Cuts and Jobs Act of 2017 (TCJA) suspended this deduction for employees until 2025. However, this deduction is still available to taxpayers who are self-employed or independent contractors. (Some states may still allow a deduction for an employee). While it’s not as easy as claiming the expenses and calling it a day, home office deductions provide fantastic ways to get a tax deduction for amounts you ordinarily would spend but are not eligible as write-offs. Keep reading to learn the details and how to deduct things like your homeowner’s association dues, security systems, and other home improvements.

Read More

End of Summer Tax Savings: Summer Home Rentals and Summer Jobs for the Kids

Considering hiring your kids to work in your business or renting property you own to your business to save money on taxes? Both of these strategies can work (and work well), but often those promoting them (the mainstream media, social media, etc.) hold forth heavily on the benefits of the strategies without considering the nuances and fine print that can end up costing money rather than saving it if you end up on the bad side of an audit. Keep reading for how to maximize tax savings on summer homes and summer jobs without getting burned.

Read More

Don’t Overpay on the Crypto 1099-K

As cryptocurrency grows in popularity, so do the complications of tax reporting. At present, there is no consistent 1099 reporting for crypto transactions. This is primarily because no 1099 form currently exists to adequately report cryptocurrency. The IRS has yet to issue third party reporting requirements to exchanges, so companies must determine on their own what information to report to the IRS and how they will report it. Some exchanges will attempt to report transactions on a traditional 1099-B, but the easily accessible transferability of crypto makes it nearly impossible for an exchange to correctly report basis information. Incorrect reporting can result in the IRS sending an unnecessary CP2000 notice, which can be both expensive and time-consuming for the taxpayer to resolve. Other exchanges issue a 1099-Misc for certain transactions, but again this doesn’t reflect the full picture. Some exchanges choose to issue a 1099-K to customers, showing only the gross proceeds of crypto transactions and also doesn’t show the full picture. Here’s what to do to avoid getting a dreaded notice from the IRS.

Read More
1 2 3 4
  • NOT A MEMBER YET?

    SUBSCRIBE TO GET ALL OF OUR
    GREAT ARTICLES AND RESOURCES!

  • Scroll to Top