Guest Article

The Tax Cuts & Jobs Act of 2017 (TCJA) created Opportunity Zones (OZ). Taxpayers who invest in Qualified Opportunity Zones can reduce capital gains tax and pay zero tax on the investment’s future appreciation. For this reason, Opportunity Zones have a significant edge over traditional capital gain deferral strategies like the 1031 Exchange. With more than 8,500 economic zones throughout the United States, investors and business owners have plenty of choices. Additionally, the investment gives them a chance to do some good in an economically depressed area, make some tax-free money, and achieve some permanent capital gain savings even after you’ve already sold your asset. What’s not to love? There are a number of intricate rules concerning OZ investment tax breaks so if you want to begin or expand your business or real estate holdings using these tax breaks, read on to learn more.

The 1031 Like-Kind Exchange (LKE) provides a great potential benefit to taxpayers who want to sell rental properties to purchase others in the United States. IRC § 1031 allows you to defer a taxable gain that would normally be taxed at the time of sale of a rental property. However, there are situations when a 1031 exchange may not be the best option for the taxpayer, and it could potentially dilute the tax savings when compared to a traditional sale or other gain minimization strategies. To take advantage of the tax deferral benefits of a 1031 exchange, you’ll need to follow a specific set of guidelines. Here, we will dive into the circumstances that you should review to determine if a 1031 exchange will be the best option in mitigating the taxes you owe.

As we navigate a world with COVID-19, large swings in the stock market have become the norm. Many buy and hold-style investors are more actively managing their portfolios to take advantage of these swings. The IRS has a special trader status for taxpayers who frequently engage in trading. This status includes a special accounting method, not available to the average investor, that can come with substantial tax savings. The status allows an investor to make special deductions and opens the door to a wide range of tax reduction strategies unavailable to the casual investor. However, with potential savings also come risks that could end up costing the taxpayer/trader more than the average investor. Weighing the pros and cons of this status is crucial in minimizing tax liability. The big question for tax planning is this — does obtaining trader tax status result in less tax?

If you made money on your real estate investment, congratulations! You’re now in the same club that more than 90 percent of the world’s millionaires do to create wealth. Now it’s time for tax on that profit. A large tax bill generally means you made a large profit. But avoiding the tax can be like having your cake and eating it too. A 1031 Exchange is an incredibly powerful tool for you to defer the tax when used in the right circumstances. Many real estate investors and landlords look to the 1031 Like-Kind Exchange (LKE) as an excellent method of selling investment real estate without paying tax at the time of sale. This gives you more use of the cash you get at the sale and more time to use it.

Timing might be one of the oldest, most valuable tax strategies known. Essentially, a timing strategy allows a taxpayer to pay tax when rates are generally lower rather than when in a higher tax bracket or when facing increasing tax rates. Given this, 2020 may have been an optimal time to sell capital assets if tax rates rise under the new administration. President-elect Joe Biden has suggested taxing capital gains as ordinary income for high-income taxpayers (more than $400,000), as well as raising the top tax rate from 37% to 39.6%. Here’s how to cash in on the lower rates and, more importantly, when. While tax law changes seldom pass quickly, we often see changes made retroactive to the beginning of the year they are voted into law. Based on a recent story in The New York Times, Bob Dylan may have anticipated the increase when he sold the copyrights to his catalog of more than 600 songs for $300 million. Not to fret if you found yourself missing the beat of Dylan’s lead, there are many things a taxpayer can do to reduce capital gains tax, especially for self-created works of art. Here’s how.

It’s finally here! After much political wrangling, Congress and President Trump signed the Consolidated Appropriations Act, 2021 (HR 133) into law on December 27, 2020. Attached to this omnibus spending bill were a number of unrelated pieces of legislation, including the latest COVID-19 relief and stimulus measures. The law puts much needed cash in the hands of business owners and individuals alike, while Congress thumbs its collective nose at the IRS by including an override of the recent notice disallowing the deduction of expenses paid for using PPP funds. Several more key provisions in the new legislation’s Division N include process simplification and forgiveness for PPP borrowers, which will make life easier for everybody. To find out how to qualify for new rounds of stimulus, automatic forgiveness, and how to get both tax credits and free money, keep reading.

For a business owner, almost nothing in life is more uncertain than running a company during a pandemic. Like most people, worry about your own livelihood, family, friends, and loved ones and how you’ll cope during COVID-19 is at the top of your mind. But unlike others, you’ve got the added concern about your employees – both for their health and safety, as well as their financial health. While the government made some relief available in the earlier days of the pandemic such as forgivable loans like the Paycheck Protection Program (PPP) and Emergency Injury Disaster Loans (EIDL) one of the biggest benefits provided has to do with a little known tax provision to the tax law. This provision makes it possible to provide certain payments without tax during a terrorist attack or disaster, but if it weren’t for a certain interpretation of President Trump’s declaration in March 2020, this benefit wouldn’t exist for COVID-19.

This information is particularly important if you are the owner/shareholder of your own corporation – C or S corp. You can set up payroll and designate tax-free reimbursements for you to be working at home – as well other tax-free money for you and for your employees. (We will discuss employees momentarily. Yes, it’s essential.) If being an employee is your main source of income – watch out! The short answer to employees claiming an office in home deduction this year is... There is no deduction!