Home sales: How to determine your “basis”
The housing market in many parts of the country is strong this spring. If you’re buying or selling a home, you should know how to determine your “basis.” How it works You can claim an itemized deduction on your tax return for real estate taxes and home mortgage interest. Most other home ownership costs can’t […]
Simple retirement savings options for your small business
Are you thinking about setting up a retirement plan for yourself and your employees, but you’re worried about the administrative burdens involved in providing a traditional pension plan? Two relatively easy options are a SEP or a SIMPLE plan. When you set up a SEP for yourself and your employees, you’ll make deductible contributions to each employee’s SEP-IRA. The maximum amount of deductible contributions that you can make to an employee’s SEP-IRA, and that he or she can exclude from income, is the lesser of 25% of compensation and $58,000 for 2021. For 2021, SIMPLE deferrals are up to $13,500 plus an additional $3,000 catch-up contributions for employees age 50 and older.
Providing optimal IT support for remote employees
Over a year into the COVID-19 pandemic, remote work has become common across many industries. Although some businesses may soon reopen their offices and facilities as employees get vaccinated, telecommuting is expected to remain a valued, widely offered employment arrangement. For business owners, this means that providing optimal IT support to remote employees will remain mission critical. When tackling this challenge: 1) Survey remote workers about their IT experiences, 2) Invest in ongoing training for support staff, 3) As necessary, upgrade the systems and software you use to enable remote work, and 4) Ensure remote employees know how to telecommute safely. Contact us for more info.
Who qualifies for “head of household” tax filing status?
When you file your tax return, you must check one of the following filing statuses: Single, married filing jointly, married filing separately, head of household or qualifying widow(er). Who qualifies to file as a head of household, which is more favorable than single? To qualify, you must maintain a household, which for more than half the year, is the principal home of a “qualifying child” or other relative of yours whom you can claim as a dependent (unless you only qualify due to the multiple support rules). You’re considered to “maintain a household” if you live in the home for the tax year and pay over half the cost of running it. We can answer any questions you have about your situation.
Tax advantages of hiring your child at your small business
As a business owner, you should know that you can save family income and payroll taxes by putting your child on the payroll. You may be able to turn high-taxed income into tax-free or low-taxed income by shifting some business earnings to a child as wages for services performed. In order for your business to deduct the wages as a business expense, the work done by the child must be legitimate and the child’s salary must be reasonable. You also may be able to achieve Social Security tax savings (depending on how your business is organized) and even make retirement plan contributions for your child. Contact us if you have any questions about the rules in your situation.
Need a new business vehicle? Consider a heavy SUV
Are you considering buying a vehicle that you’ll use in your business? If you choose a heavy sport utility vehicle (SUV), you may be able to benefit from lucrative tax rules for those vehicles. New and used heavy SUVs, pickups and vans acquired and put to business use in 2021 are eligible for 100% first-year bonus depreciation. However, you must use the vehicle more than 50% for business. If your business use is between 51% and 99%, you can deduct that percentage of the cost in the first year the vehicle is placed in service. This tax break is available only if the manufacturer’s gross vehicle weight rating is above 6,000 pounds. Consult with us to help evaluate if this is the right move for your business.
How to ensure life insurance isn’t part of your taxable estate
If you have a life insurance policy, you may want to ensure that the benefits your family will receive after your death won’t be included in your estate. That way, the benefits won’t be subject to federal estate tax. For 2021, the federal estate and gift tax exemption is $11.7 million ($23.4 million for married couples). But in 2026, the exemption is scheduled to fall. Under the estate tax rules, insurance on your life will be included in your taxable estate if your estate is the beneficiary of the insurance proceeds, or you possessed certain economic ownership rights in the policy at your death (or within 3 years of your death). Contact us for assistance with estate planning and taxes.
COBRA provisions play critical role in COVID-19 relief law
If your business is required to offer COBRA coverage to employees who have lost group health plan coverage, the recently passed American Rescue Plan Act includes some critical provisions to be aware of. To wit, assistance-eligible individuals (AEIs) may receive a 100% subsidy for COBRA premiums during the period beginning April 1, 2021, and ending on September 30, 2021. An AEI is generally any eligible beneficiary who elects COBRA coverage because of a qualifying event (typically involuntary termination or reduction of hours) between those dates. The law’s COBRA provisions also address matters such as voluntarily offering other coverage and issuing notices. Contact us for more information.
EIDL loans, restaurant grants offer relief to struggling small businesses
Many provisions of the recently signed American Rescue Plan Act (ARPA) target small businesses adversely affected by the COVID-19 pandemic. If you own a small company, you may want to explore funding via the Small Business Administration’s Economic Injury Disaster Loan (EIDL) program. Eligible small businesses may receive targeted EIDL advances and the amounts received will be excluded from the recipient’s gross income. If you happen to own a qualifying restaurant or similar enterprise, the ARPA has created restaurant revitalization grants that work much the same way. The provisions are effective as of the ARPA’s date of enactment: March 11, 2021. Contact us for further details.
New law tax break may make child care less expensive
The new American Rescue Plan Act provides eligible families with an enhanced child and dependent care credit for 2021. This is the credit for expenses paid for the care of qualifying children under the age 13 so the taxpayer can be gainfully employed. For 2021, the first $8,000 of care expenses generally qualifies for the credit if you have 1 qualifying individual, or $16,000 if you have 2 or more. (These amounts were $3,000 and $6,000, respectively.) If AGI is $125,000 or less, the maximum credit is $4,000 with 1 qualifying individual and $8,000 with 2 or more. The refundable credit phases out and for taxpayers with an AGI greater than $440,000, it’s phased out completely.
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