Investment interest expense is still deductible, but that doesn’t necessarily mean you’ll benefit
Can the investment interest expense deduction save you tax on your 2018 return? It’s for interest on debt used to buy assets held for investment, and you must pass some hurdles to benefit. First, you must itemize, which may no longer benefit you because of the higher standard deduction. Second, interest incurred to produce tax-exempt income, such as from municipal bonds, isn’t deductible. Finally, the deduction is generally limited to your taxable interest income, nonqualified dividends and net short-term capital gains for the year. Contact us for more details.
Depreciation-related breaks on business real estate: What you need to know when you file your 2018 return
Commercial buildings and improvements generally are depreciated over 39 years, which essentially means you can deduct a portion of the cost every year over the depreciation period. (Land isn’t depreciable.) But special tax breaks that allow deductions to be taken more quickly are available for certain real estate investments. Some were enhanced by the Tax Cuts and Jobs Act (TCJA) and may provide a bigger benefit when you file your 2018 tax return. But there’s one break you might not be able to enjoy due to a drafting error in the TCJA. Contact us to learn more.
There’s still time to get substantiation for 2018 donations
To claim an itemized deduction for a donation of more than $250, generally you need a contemporaneous written acknowledgment from the charity. “Contemporaneous” means the earlier of 1) the date you file your income tax return, or 2) the extended due date of your return. If you made a donation in 2018 but haven’t received substantiation and you’d like to deduct it, consider requesting a written acknowledgment from the charity and waiting to file your 2018 return until you receive it. Additional rules apply to certain types of donations. Contact us to learn more.
Many tax-related limits affecting businesses increase for 2019
A variety of tax-related limits affecting businesses are annually indexed for inflation, and many have increased for 2019. For example, the Section 179 expensing limit has gone up to $1.02 million from $1 million. Also up are the income-based phase-ins for certain limits on the new-last-year Sec. 199A qualified business income deduction for owners of pass-through entities. And most limits related to employer-sponsored retirement plans, such as 401(k)s, are higher this year. Contact us for more information about the limits that will affect your business in 2019.
Is your business stuck in the mud with its marketing plan?
A good marketing plan should be like a network of well-paved, clearly marked roads shooting out into the world and leading back to your company. But a business can get stuck in the mud trying to build these thoroughfares. For example, many companies use the same, outdated marketing materials for years. Others overly focus on one marketing medium, missing critical opportunities. Still others have messaging that’s inconsistent, hard to follow or too controversial. The good news is that there are corrective measures for these foibles and others. Contact us for ideas.
What will your marginal income tax rate be?
Under the TCJA, unmarried taxpayers could see their taxes go up due to their filing status. To further eliminate the marriage “penalty,” the TCJA changed some of the middle tax brackets, negatively affecting some unmarried filers. For example, single and head of household filers could be pushed into the 32% (33% in 2017) and 35% tax brackets much more quickly than pre-TCJA. It will be hard to tell exactly how specific taxpayers will be affected by TCJA changes until they file their 2018 tax returns. Contact us for help assessing your tax bracket for 2018 and 2019.
Higher mileage rate may mean larger tax deductions for business miles in 2019
A higher IRS mileage rate means larger tax deductions for business miles in 2019. The optional standard mileage rate used to calculate the deductible costs of operating an auto for business has increased by 3.5 cents, to 58 cents per mile. The mileage rate comes into play when businesses don’t want to keep track of actual vehicle-related expenses. But you still must record certain information, such as the mileage, date and destination for each trip. The mileage rate can also be used for reimbursing employees. Many rules and limits apply. Contact us for details.
Getting wise to the rise of “smart” buildings
If your business is considering upgrading its facility, or moving to or constructing a new one, be prepared to encounter “smart” buildings. A smart building is one equipped with sensors that gather and track information about energy usage. With this data, the building’s energy consumption can be more accurately tracked and regulated to lower costs. When buying or building a new facility, factor the long-term advantages of smart technology into the price. When leasing, inquire about whether and how smart features have been added. Contact us for more info.
2 major tax law changes for individuals in 2019
Most TCJA provisions went into effect in 2018 and apply through 2025 or are permanent, but two major changes affect individuals beginning in 2019: 1) While the TCJA reduced the medical expense deduction threshold from 10% of adjusted gross income to 7.5%, the reduction applies only to 2017 and 2018. So for 2019, the threshold returns to 10%. 2) For divorce agreements executed (or, in some cases, modified) after Dec. 31, 2018, alimony payments won’t be deductible by the payer but will be excluded from the recipient’s taxable income. Contact us for details.
4 business functions you could outsource right now
It’s never been easier to outsource. Outsourcing can help you stick to your mission and build your bottom line. One option is IT: A good provider can keep your systems updated and secure. Payroll/HR is another possibility. Today’s compliance requirements are complex and variable. You could outsource customer service to avoid the turnover problems typical of this department, or you might outsource accounting services to a provider capable of handling the challenges of bookkeeping, payables, receivables and financial reporting. We can help you explore outsourcing.