Jason Dinesen, CPA, Author at Think Outside the Tax Box

AUTHOR SPOTLIGHT

Jason Dinesen, CPA

Jason Dinesen is an enrolled agent and a licensed public accountant in Iowa. Jason prepares around 225 tax returns every year, so he sees a lot of different things in his practice. Jason is a CPE presenter to other accountants, presenting almost every day on dozens of tax topics. Jason is a member of the National Association of Enrolled Agents, and has served as president of the Iowa Society of Enrolled Agents multiple times, including right now. Prior to starting his own practice in 2009, Jason worked for a third-party administrator of retirement plans, where he worked with terminations of qualified plans. In his free time, Jason tinkers with the audio equipment and software in his in-home studio he presents from. Jason is a native Iowan, an Iowa Hawkeye football fan, and an aficionado of the Battle of the Little Bighorn (Custer’s Last Stand). He and his wife have two boys in 7th grade and 4th grade, who keep him plenty busy when not dealing with taxes.

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To Lease or to Buy: What is the Best Option with Business Vehicles?

Buying a vehicle is a way to potentially receive a large tax deduction, but is it always the best thing to do? What about buying versus leasing? The tax code treats vehicles differently from other types of assets and business expenses, so it helps to make sure you’re informed when thinking about using your vehicle to reduce your tax liability.

Background

A vehicle purchase by a business is treated as the purchase of an asset. This means you can deduct part of the expense each year in the form of depreciation deductions. Vehicles also might qualify for accelerated depreciation methods. In this current era of the Tax Cuts and Jobs Act (TCJA) and 100% bonus depreciation, that means a 100% deduction when you buy a vehicle … right? Not so fast.

Section 280F of the Tax Code places restrictions on depreciation deductions for vehicles. The terminology used in this section of the Code is “luxury vehicle” (in fact the title of §280F is “Limitation on depreciation for luxury automobiles”), but this is a misleading term.

When we think of “luxury vehicle” we likely think of a high-end vehicle. But the reality is, the tax law defines such a vehicle as any 4-wheeled vehicle with an unloaded gross vehicle weight of 6,000 pounds or less. I bet you didn’t think your 5 year old minivan with high mileage falls into the “luxury vehicle category,” but it can! This means you may be limited in how much you can write off against your taxable income.

Can leasing a vehicle work as a way to get around the §280F limitations? The IRS has thought about that too. But keep reading – we’ll give you some loopholes that work around the luxury auto limitation and help you decide if leasing or buying your next vehicle will help you pay less in tax.

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Net Operating Loss Changes and the CARES Act: Planning Opportunities for 2020 Returns

One bright side to losing money in your business is your ability to at least use those losses as a tax deduction against other income you may have. Unfortunately due to tax reform it shredded your ability to claim NOLs after 2017 to 80% of taxable income – it all eliminated the opportunity to carry back these losses to get refunds. We’ve still been reeling from both of these changes.

The CARES Act changed net operating losses (NOLs) in a major way to make usage of an NOL more taxpayer friendly … for a limited time. Because the changes are retroactive to 2018, this gives you the opportunity for 3 years of losses to provide much needed relief. The Treasury even provided a fast track to cash – keep reading to find out how.

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CURRENT EDITION

Interview with Michael Kitces

Video Interview with Michael Kitces: Opening the Back Door to the ROTH IRA

Back in the spring of 2021 Editor-in-Chief, Dominique Molina, sat down with Michael Kitces from Kitces.com to discuss creative ways to use the ROTH IRA when developing tax planning strategies. This exclusive video interview is jam-packed with a variety of recommendations and suggestions highlighting the flexibility you gain in your planning when including the ROTH IRA as a tool! Sit back, relax, and enjoy the show!

Split Dollar Life Insurance

Using Split-dollar Life Insurance as a Tax Loophole

I’m no fan of needlessly complicating people’s tax situations, and I often remind readers to consider administrative overhead and compliance costs in addition to tax savings when evaluating tax strategies. The following strategies work best for high-net-worth taxpayers and medium to large “small businesses.”

I’m not talking about people who think they are high-net-worth, but if even after the estate tax exemption was doubled, you have to file an estate tax return (Form 706), this is you. If your individual or business net worth is in or is approaching the double-digit millions, this may not apply to you – yet. Keep reading anyway because it may be only a matter of time before you can use it or one of your “I wanna be a playa” clients comes to you asking about this strategy because they saw it on TikTok.

Keep reading to learn more on how to save.

Joint vs Separate New Advantages

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.

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  • Avoiding Passive Loss Limitations Through Short-term and Alternative Rentals

    Short-term rentals like AirBnb are becoming increasingly popular with taxpayers who invest in real estate. For many taxpayers, the appeal of these properties is the flexibility and cash flow potential. However, there may be an overlooked third tax benefit. In many situations these short-term rentals may not qualify as a rental activity to the IRS, and that may offer a big tax break. While many rental activities generate losses, this can leave taxpayers facing the frustrations of not always getting to deduct those losses right away due to the passive activity limitations.

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    How Business Owners Can Boost Income by Avoiding the $10,000 SALT Cap

    Taxpayers have been whipsawed by confusing rules for the $10,000 limit on deducting state and local taxes (SALT), the most politically charged piece of the Tax Cuts and Jobs Act (TCJA) of 2017. The cap has caused nearly 11 million individuals to lose an annual deduction worth $323 billion. But many owners of private businesses known as passthroughs can avert that financial pain. If you own your company and thus report your business income on your personal federal income tax return, here’s what you need to know.

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    GOFUNDME & KICKSTARTER: TAXABLE? DEDUCTIBLE?

    Millions of taxpayers in the United States are using crowdfunding websites like GoFundMe and Kickstarter to raise money for important needs, such as paying medical bills, paying legal fees, or funding a new business venture. Both the IRS and the courts have been surprisingly silent on the tax consequences of crowdfunding platforms. The good news is that established tax law provides a clear road map for answering most tax questions created by raising money from a crowdfunding website. By knowing these rules, taxpayers can use crowdfunding to raise cash and minimize their overall tax exposure.

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    My Client Stuck with a Mistaken C Corporation Election?

    My client formed three limited liability companies (LLCs) to hold his rental properties. Without consulting me, he filed Form 8832, Entity Classification Election, to elect C corporation treatment, effective January 1, 2020, for these LLCs. I want the LLCs to be disregarded entities, which is the most tax-efficient structure for his situation. What is the best way to undo these elections?

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    Quick Guide to Claiming Work-From-Home COVID-19 Expenses to Reduce Your Tax Bill

    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!

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    Five Tax Reduction Strategies for the Casual Cryptocurrency Owner

    With so many people looking for more ways to make money outside their 9 to 5 jobs, many are turning to money making methods using technology including trading in cryptocurrency. For tax purposes, the IRS considers cryptocurrencies property, not as currency. Just like other property types, stocks, investments, or real estate, when you sell, swap, or otherwise dispose of your cryptocurrency for more or less than you acquired it for, you incur a tax reporting obligation. As an example, there would be a $1,000 capital gain if 0.1 bitcoin is bought for $2,000 in June of 2020 and then sold for $3,000 two months later. This profit must be reported on the tax return and a certain amount of tax is due on the gain, depending on the tax bracket of the taxpayer. In this example, the gain would be short term requiring the profit to be taxed at the filer’s ordinary tax rate. These rates range anywhere from 0-37%.

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    Extra Taxes on S Corporation Distribution?

    My client plans to take about $15,000 in distributions in excess of his basis from his S corporation construction business. I know this generates tax for him. He’s in the 32 percent tax bracket and single. Does he also have to pay the 3.8 percent net investment income tax and the 0.9 percent additional Medicare tax on this amount? Is there a way for him to avoid taxes on this amount?

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    Reduce Taxable Income Up to $25,000 with Passive Rental Losses

    You have likely heard that owning rental real estate provides great tax benefits. This is true for a multitude of reasons, but there’s one benefit that is arguably the best of the bunch: The Small Taxpayer Allowance for Deducting Passive Rental Losses. Based on average household income levels, more than three-quarters of taxpayers can potentially qualify for this fantastic tax benefit that offers taxable income reduction of up to $25,000.

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