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 be deducted currently. However, these costs may increase your home’s “basis” (your cost for tax purposes). And a higher basis can save taxes when you sell. The law allows an exclusion from income for all or part of the gain realized on the sale of your home. The general exclusion limit is $250,000 ($500,000 for married taxpayers). You may feel the exclusion amount makes keeping track of the basis relatively unimportant. Many homes today sell for less than $500,000. However, that reasoning doesn’t take into account what may happen in the future. If history is...[ Read More ]
Despite the COVID-19 pandemic, government officials are seeing a large increase in the number of new businesses being launched. From June 2020 through June 2021, the U.S. Census Bureau reports that business applications are up 18.6%. The Bureau measures this by the number of businesses applying for an Employer Identification Number. Entrepreneurs often don’t know that many of the expenses incurred by start-ups can’t be currently deducted. You should be aware that the way you handle some of your initial expenses can make a large difference in your federal tax bill. How to treat expenses for tax purposes If you’re starting or planning to launch a new business, keep these three rules in mind: Start-up costs include those incurred or paid while creating an active trade or business — or investigating the creation or acquisition of one. Under the tax code, taxpayers can elect to deduct up to $5,000 of...[ Read More ]
Many homeowners across the country have seen their home values increase recently. According to the National Association of Realtors, the median price of homes sold in July of 2021 rose 17.8% over July of 2020. The median home price was $411,200 in the Northeast, $275,300 in the Midwest, $305,200 in the South and $508,300 in the West. Be aware of the tax implications if you’re selling your home or you sold one in 2021. You may owe capital gains tax and net investment income tax (NIIT). Gain exclusion If you’re selling your principal residence, and meet certain requirements, you can exclude from tax up to $250,000 ($500,000 for joint filers) of gain. To qualify for the exclusion, you must meet these tests: You must have owned the property for at least two years during the five-year period ending on the sale date. You must have used the property as a principal residence...[ Read More ]

Time to plan an in-person board retreat?

Posted September 17, 2021

As states open for business and the need for social distancing recedes, your not-for-profit organization may want to think about scheduling an in-person retreat for your board of directors. Members are likely to welcome the opportunity to see one another again in the flesh and a retreat can provide them with a chance to de-stress and think creatively about how your nonprofit should move forward when the pandemic ends. Get board buy-in Board retreats enable participants to get past the mundane topics of regular board meetings — particularly if they’ve been holding meetings online for more than a year. Although Zoom and other videoconference sites have been essential during the pandemic, they generally don’t produce the kind of synergistic magic that’s possible when like-minded people brainstorm face-to-face. But before you start scheduling a meeting, float the idea past your board. Board members need to agree about the merit of a...[ Read More ]
If you have a parent entering a nursing home, you may not be thinking about taxes. But there are a number of possible tax implications. Here are five. 1. Long-term medical care The costs of qualified long-term care, including nursing home care, are deductible as medical expenses to the extent they, along with other medical expenses, exceed 7.5% of adjusted gross income (AGI). Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating and rehabilitative services, and maintenance or personal-care services required by a chronically ill individual that is provided under care administered by a licensed healthcare practitioner. To qualify as chronically ill, a physician or other licensed healthcare practitioner must certify an individual as unable to perform at least two activities of daily living (eating, toileting, transferring, bathing, dressing, and continence) for at least 90 days due to a loss of functional capacity or severe cognitive impairment....[ Read More ]
Married couples may not be able to save as much as they need for retirement when one spouse doesn’t work outside the home — perhaps so that spouse can take care of children or elderly parents. In general, an IRA contribution is allowed only if a taxpayer earns compensation. However, there’s an exception involving a “spousal” IRA. It allows contributions to be made for nonworking spouses. For 2021, the amount that an eligible married couple can contribute to an IRA for a nonworking spouse is $6,000, which is the same limit that applies for the working spouse. IRA advantages As you may know, IRAs offer two types of advantages for taxpayers who make contributions to them. Contributions of up to $6,000 a year to an IRA may be tax deductible. The earnings on funds within the IRA are not taxed until withdrawn. (Alternatively, you may make contributions to a Roth...[ Read More ]
Many Americans remain unemployed due to the COVID-19 pandemic — at least 9.8 million at the end of April, according to the U.S. Bureau of Labor Statistics. But that’s expected to change quickly as employers ramp up hiring activities. If your not-for-profit will soon need new staffers, you might want to start putting out feelers now. Obviously, the decision to hire is a difficult one considering the economic uncertainty that may remain. But you also don’t want to miss out on the best talent. Here are some issues to consider. Needs assessment First off, do you need new employees? Even if you plan to expand services and introduce new programs, volunteers may be capable of picking up the slack. Or current staffers may be underused on projects that are stagnating or winding down. Carefully examine your nonprofit’s priorities and consider eliminating programs that aren’t meeting expectations so that you can redeploy...[ Read More ]
During the pandemic, many employees have postponed using their allotted paid time off until COVID-related restrictions are lifted and safety concerns subside. This situation has caused an increase in accruals for certain employers. Here’s some guidance to help evaluate whether your company is required to report a liability for so-called “compensated absences” and, if so, how to estimate the proper amount. Balance sheet effects Compensated absences include: Paid vacation, Paid holidays, Paid sick leave, and Other forms of time off earned by employment. Accruals for compensated absences are classified as other liabilities on companies’ balance sheets. The liability also creates a deferred tax asset equal to the accrual times the effective tax rate, because companies can’t deduct paid time off until it’s actually paid under U.S. tax law. When to book an accrual Before quantifying the compensated absences liability, review your company’s policies and procedures related to paid time off. Does your company allow...[ Read More ]
Timing counts in financial reporting. Under the accrual method of accounting, the end of the accounting period serves as a strict “cutoff” for recognizing revenue and expenses. However, during the COVID-19 pandemic, managers may be tempted to show earnings or reduce losses. As a result, they may extend revenue cutoffs beyond the end of the period or delay reporting expenses until the next period. Here’s an overview of the rules that apply to revenue and expense recognition under U.S. Generally Accepted Accounting Principles (GAAP). General principle Companies that follow GAAP recognize revenue when the earnings process is complete, and the rights of ownership have passed from seller to buyer. Rights of ownership include possession of an unrestricted right to use the property, title, assumption of liabilities, transferability of ownership, insurance coverage and risk of loss. In addition, under accrual-based accounting methods, revenue and expenses are matched in the reporting periods...[ Read More ]
If you’re a business owner and you hire your children this summer, you can obtain tax breaks and other nontax benefits. The kids can gain on-the-job experience, spend time with you, save for college and learn how to manage money. And you may be able to: Shift your high-taxed income into tax-free or low-taxed income, Realize payroll tax savings (depending on the child’s age and how your business is organized), and Enable retirement plan contributions for the children. A legitimate job If you hire your child, you get a business tax deduction for employee wage expenses. In turn, the deduction reduces your federal income tax bill, your self-employment tax bill (if applicable), and your state income tax bill (if applicable). However, in order for your business to deduct the wages as a business expense, the work performed by the child must be legitimate and the child’s salary must be reasonable....[ Read More ]