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In between preparing for the year-end holidays, school vacations, travel, work, and so on, tax planning should not be on the back burner. Although 2015 is quickly coming to a close, there is still time, with careful planning, to execute some last minute tax strategies. In many cases, these strategies can help minimize the tax burden. Of course, every individual’s situation is different, so please contact our office for specific details about a year-end tax planning strategy customized to you.
For many taxpayers, one of the most significant questions looming over 2015 returns is will they be able to claim all the deductions, credits and incentives that were available in 2014? Many of these incentives are grouped in a package known as the tax extenders. If you have taken in 2014 (or in a prior year) the state and local sales tax deduction, higher education tuition deduction, teacher’s classroom expense deduction, IRA distribution to charity, among others, you enjoyed the benefit of a tax extender.
Under current law, these popular tax breaks expired after 2014. That means they are no longer available for 2015, unless they are renewed by Congress. At this time, it is highly likely that Congress will vote to extend the extenders at least for 2015. Congress could approve a two-year extension. A vote is expected before January 1, 2016. However, Congress could delay the vote until early January. Uncertainty is never far from the extenders, but the best approach is to develop a year-end planning strategy that reflects both an extension of the extension and develop another plan that does not.
For example, qualified taxpayers contemplating making a gift to a charitable organization should take into account renewal of the tax break for gifts to charity from an IRA. If all the requirements are met, this may be a valuable tax break. However, there are other avenues for gifts to charity that can help maximize tax savings if you do not qualify for the deduction or the deduction is not renewed. Also, keep in mind the rules for substantiating gifts to charity. You do not want to lose the tax benefit of a generous gift to charity because these substantiation rules were not followed. Our office can explore these strategies with you.
While taxpayers wait for action on the extenders, tax bills already passed in 2015 could be valuable. The Defending Public Safety Employees’ Retirement Act expands the exemption from the penalty for early retirement withdrawals to include certain federal law enforcement officers, federal firefighters, customs and border protection officers, and air traffic controllers. The Surface Transportation Act of 2015 provides that a veteran’s eligibility to contribute on a pre-tax basis to a health savings account (HSA) is not affected by receipt of medical care from the VA for a service-connected disability.
The roster of traditional year-end tax planning strategies is lengthy and often involves methods to shift income between 2015 and 2016. To postpone income to 2016, taxpayers can consider delaying plans to sell appreciated assets, redeem U.S. savings bonds, completing Roth IRA conversions, and so on. If possible, it may be worthwhile to postpone any bonuses until after 2015. In contrast, some taxpayers may want to accelerate income into 2015. This can be particularly valuable if a taxpayer expects to be in a higher tax bracket in 2016 compared to 2015.
When considering traditional year-end techniques, keep in mind the 3.8-percent net investment income (NNI) tax. The NII tax applies to the lesser of (1) an individual’s net investment income (NII) or (2) the excess of the individual’s modified adjusted gross income (MAGI) over the threshold amount. The thresholds are $250,000 for married taxpayers filing a joint return and surviving spouses; $125,000 for married taxpayers filing a separate return; and $200,000 for all other taxpayers.
Gift-making is an important year-end tax strategy that can be overlooked. The Tax Code allows taxpayers to give away up to an “annual exclusion amount” per recipient per year free of gift tax. For 2015, the annual exclusion amount is $14,000. If property is given instead of cash, the value of the gift is the fair market value of the property. If spouses consent to split all gifts that are made by either one of them during any year and each spouse is also a U.S. citizen or resident, then the gifts can be deemed as having been made one half by each spouse. As a result, spouses who consent to split their gifts can transfer twice the annual per-recipient exclusion amount each year, free of gift tax ($28,000 for 2015).
These are just some of the tax strategies to consider before year-end.
Please contact my office for more details.
Message from Mike Butler
“Are you looking for a real estate investor expert CPA? Did you know my CPA, Mike Grinnan can prepare your tax returns?… anywhere in the U.S.A. – his 5 Star software makes this. FYI, Mike Grinnan has been doing a superstar Chicago investor’s tax returns for over 10 years now. Mike Grinnan is one of America’s 5 Star CPAs for real estate investors”
| J. Michael Grinnan, CPA.CITP
Certified Public Accountant
9900 Corporate Campus Drive, Suite 3000
Louisville, KY 40223
Office Email Mike@JMGCPA.comWebsite www.JMGCPA.com
Question from Lynn:
Mr. Butler: This is Gary J. and we are Gold Member clients of yours and I have an two quick questions.
Q1: First did I understand correctly that a non refundable lease option fee is not counted as income until consummation of the purchase????
A1: great question, but first, you have fallen victim to improper investor slang.
for starters, in my business there is no such thing as a “Lease Option Fee.”
This is actually TWO separate transactions involving what you are describing.
1 – anyone may purchase an “Option to Buy” on any property I own. This has absolutely nothing to do with rent or a lease. In fact, you could have a tenant occupied rental and you could allow an investor to purchase an “Option To Buy.” Click to Access Video or Read More
I just joined as an annual member today and have a few questions. I’m trying to get through as many videos as possible as quickly as possible in order to get the books done for a client of mine who has 25 LLCs, each with multiple rental properties and properties he has bought and sold. Unfortunately I don’t have time to watch the full series as I am in a major crunch at the moment.
Mike – Oops and Sorry Becky, but I can not help you on this one… your crunch thing.
I’m specifically looking for videos that will explain how to enter a HUD from a purchase when there is a loan involved and a line item referring to “improvement escrow account” as well as “down payment reserve account”
Mike – first of all, please understand that many investors create weird accounts that really do not fit properly in the world of bookkeeping for real estate investors.
The BIGGEST Thing to Focus on is getting your/their books set up so they are “Investor Friendly” through out the year allowing the investor to “Push A Button” to instantly retrieve those special reports investors want along with pushing a button at tax time. Click to Access Video or Read More
We are creating a investment syndication for buying and working out non-performing mortgages in an LLC entity.
Each member will require a capital account for their investment dollars and be able to receive pro-rata shares of profits, return of capital and losses (if any).
Will the Investor Books software support the bookkeeping for the syndication?
Anything you can imagine doing as a real estate investor, can be handled properly in Investor Books PRO System.
This article or video is for members only!
We have 2 people who will be using the Investor Books / Tenant Tracking system.
Do we need to purchase QB multi-user and network our computers so that the data will sync ? How does that work?
Can an S corporation own an interest in another business entity?
An S corporation may own an interest in another business entity.
An S corporation can be a member of an affiliated group by owning 80 percent or more of the stock of a C corporation. The group then can elect to file on a consolidated basis, if other affiliated group rules are met. But the S corporation itself cannot join the consolidated group.
Although in general only individuals can be shareholders in an Click to Access Video or Read More
Bigger Pockets and Brandon Turner hit another home run!!
Making the Bigger Pockets “7 Top Business Books To Help You Put Vital Systems In Place” is like winning an Oscar or an Emmy! Thank You again.
I want to share this award celebration with you – the next 100 Investors who buy my book “Landlording On AutoPilot” will get two THREE FREE Bonuses: (already got my book, then buy as a gift for special person)
BONUS 1: a brand new form, not in my book, named the “Animal Application Form”
BONUS 2: “159 Point Rent Ready Checklist”
BONUS 3: “How I Bought 50 Houses in a Year While Working My Full Time Job” mp3 audio, (keep in mind, I started with less than $1,000 in my savings account and I have never gone to a bank to buy an investment property.)
To Your Continued $uccess,
P.S. you can email Melissa Melissa.MikeButler@gmail.com to order as well
How Do I? Follow the new-for-2015 one-IRA rollover-per-year limit?
As most people know, a taxpayer can take a distribution from an IRA without being taxed if the taxpayer rolls over (contributes) the amount received into an IRA within 60 days. This tax-free treatment does not apply if the individual rolled over another distribution from an IRA within the one-year period ending on the day of the second distribution.
Taxpayers and the IRS both believed that this one-rollover-per-year limit was applied separately to Click to Access Video or Read More
Tuesday, October 15, 7:28 pm
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