With Congress returning from its August recess, this is the question on tax-savvy Americans’ minds. Many valuable tax breaks aren’t permanent, so Congress has to pass legislation extending them to keep them in effect. Unfortunately, Congress often waits until the last minute to do so. For example, Congress didn’t pass 2014 extenders until December 2014, […]
The tax treatment of investment income varies, and not just based on whether the income is in the form of dividends or interest. Qualified dividends are taxed at the favorable long-term capital gains tax rate (generally 15% or 20%) rather than at the applicable ordinary-income tax rate (which might be as high as 39.6%). Interest […]
If your business exports American-made goods or performs architectural or engineering services for foreign construction projects, an interest-charge domestic international sales corporation (IC-DISC) can help slash your tax bill. An IC-DISC is a “paper” corporation you set up to receive commissions on export sales, up to the greater of 50% of net income or 4% […]
If you’re a collector, donating from your collection instead of your bank account or investment portfolio can be tax-smart. When you donate appreciated property rather than selling it, you avoid the capital gains tax you would have incurred on a sale. And long-term gains on collectibles are subject to a higher maximum rate (28%) than […]
Teenagers’ retirement may seem too far off to warrant saving now, but IRAs can be perfect for teens precisely because they’ll likely have many years to let their accounts grow tax-deferred or tax-free. The 2015 contribution limit is the lesser of $5,500 or 100% of earned income. A teen’s traditional IRA contributions typically are deductible, […]
Mortgage interest rates are still at historically low levels, but they’re expected to go up by year end. So if you’ve been thinking about helping your child — or grandchild — buy a home, consider acting soon. There also are some favorable tax factors that will help: 0% capital gains rate. If the child is […]
With nonqualified stock options (NQSOs), if the stock appreciates beyond your exercise price, you can buy shares at a price below what they’re trading for. This is the same as for the perhaps better-known incentive stock options (ISOs). The tax treatment of NQSOs, however, differs from that of ISOs: NQSOs create compensation income — taxed […]
If you usually receive a large federal income tax refund, you’re essentially making an interest-free loan to the IRS. Rather than wait until you file your 2015 tax return in 2016, why not begin enjoying your “refund” now by reducing your withholdings or estimated tax payments for the remainder of 2015? It’s particularly important to […]
On June 26, the U.S. Supreme Court ruled that same-sex couples have a constitutional right to marry, making same-sex marriage legal in all 50 states. For federal tax purposes, same-sex married couples were already considered married, under the Court’s 2013 decision in United States v. Windsor and subsequent IRS guidance — even if their state […]
With the U.S. Supreme Court’s June 25 decision upholding the Affordable Care Act (ACA) yet again, employers subject to the act’s information reporting provision can no longer afford to put off planning in the hope that the requirements might go away. Beginning in 2016, “large” employers as defined by the act (generally employers with 50 […]
A potential downside of tax-deferred saving through a traditional retirement plan is that you’ll have to pay taxes when you make withdrawals at retirement. Roth plans, on the other hand, allow tax-free distributions; the tradeoff is that contributions to these plans don’t reduce your current-year taxable income. Unfortunately, modified adjusted gross income (MAGI)-based phaseouts may […]
Even though portability now allows married couples to use up both spouses’ estate tax exemptions without having to make lifetime asset transfers or set up trusts, this “easier” path isn’t necessarily the better path. For couples with large estates, making lifetime asset transfers and setting up trusts can provide benefits that exemption portability doesn’t offer. […]