Plan now for year-end gifts with the gift tax annual exclusion
Now that Labor Day has passed, the holidays are just around the corner. Many people may want to make gifts of cash or stock to their loved ones. By properly using the annual exclusion, gifts can reduce the size of your taxable estate, within generous limits, without triggering any estate or gift tax. The exclusion amount for 2023 is $17,000. It covers gifts you make to each recipient each year. Therefore, a taxpayer with 3 children can transfer $51,000 this year free of federal gift taxes. If the only gifts made during a year are excluded in this way, there’s no need to file a federal gift tax return. Contact us for the most tax-effective way to give large gifts to loved ones.
Selling your home for a big profit? Here are the tax rules
In recent years, many people have seen their home values rise. Be aware of the tax implications when selling. If you’re selling your principal residence, you can exclude up to $250,000 ($500,000 for joint filers) of gain, if you meet certain requirements. For example, you must have owned the property for at least two years during the five-year period ending on the sale date. If you sell your main home, and you qualify to exclude up to $250,000/$500,000 of gain, the excluded gain isn’t subject to the 3.8% net investment income tax. However, gain that exceeds the exclusion limit is subject to the tax if your modified adjusted gross income is over a certain amount. Questions? Contact us.
Disabled family members may be able to benefit from ABLE accounts
There may be a tax-advantaged way for people to save for the needs of family members with disabilities, without having them lose eligibility for government benefits. It’s done though a tax-free ABLE account, which can be used for disability-related expenses. Eligible individuals currently must have become blind or disabled before turning age 26. (However, the SECURE 2.0 law increases the age to 46, beginning Jan. 1, 2026.) ABLE accounts can be created by eligible individuals to support themselves, by family members to support dependents, or by guardians. Contributions up to the annual gift-tax exclusion amount ($17,000 in 2023) can be made to an account each year. Contact us with questions.
Cost containment: An important health care benefits objective for businesses
Cost containment should be one of the primary objectives of your business’s health care benefits strategy. To succeed at this effort, you’ve got to maintain a deep familiarity with two things: 1) your workforce, and 2) the health benefits marketplace. Rather than relying on vendor-provided materials, actively interact with employees to determine which benefits they truly value and need. Use metrics to analyze benefits utilization and identify gaps where you may be losing money. Consider engaging an outside expert to conduct a return-on-investment study of your plan, as well as to perhaps audit claims payments and pharmacy services to catch mistakes and even fraud. Contact us for help.
Guaranteeing a loan to your corporation? There may be tax implications
Let’s say you decide to, or are asked to, guarantee a loan to your corporation. Before agreeing to act as a guarantor of a debt of your corporation, be aware of the possible tax implications. If the business defaults on the loan, and you make good on the obligation, the payment of principal or interest generally results in either a business or a nonbusiness bad debt deduction. If it’s a business bad debt, it’s deductible against ordinary income. A business bad debt can be either totally or partly worthless. If it’s a nonbusiness bad debt, it’s deductible as a short-term capital loss (subject to certain limitations). A nonbusiness bad debt is deductible only if it’s totally worthless.
The tax consequences of employer-provided life insurance
Employer-provided life insurance is a desirable fringe benefit. However, if group term life insurance is part of your benefits package, and the coverage is higher than $50,000, there may be undesirable income tax implications. The first $50,000 of group term life insurance coverage that your employer provides is excluded from taxable income and doesn’t add anything to your income tax bill. But the employer-paid cost of group term coverage in excess of $50,000 is taxable income to you. It’s included in the taxable wages reported on your Form W-2 (even though you never actually receive it). We can answer questions about group life insurance coverage and whether it’s adding to your tax bill.
Planning ahead for 2024: Should your 401(k) help employees with emergencies?
The SECURE 2.0 law contains a provision that will soon allow eligible employers to provide more help to employees facing emergencies. This will be done though pension-linked emergency savings accounts. Effective for plan years beginning Jan. 1, 2024, a plan sponsor can amend its 401(k), 403(b) or 457(b) plan to offer emergency savings accounts connected to the plan. The accounts can only be offered to participants who aren’t highly compensated. A participant must be allowed to make withdrawals at least once per month. No reason needs to be provided and a participant must not be charged any fees for the first four withdrawals each plan year. Other rules apply. Contact us with questions.
5 tips for more easily obtaining cyberinsurance
Every business should dedicate time and resources to cybersecurity. One way to protect yourself financially is to invest in cyberinsurance. This type of coverage is designed to mitigate losses from incidents such as data breaches, business interruption and network damage. If you decide to buy a policy, here are five tips to help ease the application process: 1) Be detail-oriented when filling out the paperwork. 2) Establish and fortify a comprehensive cybersecurity program. 3) Create and document a disaster recovery plan. 4) Be prepared for an insurer to test your cyberdefenses. 5) Consider a third-party assessment of your systems and users. Contact us for help with this purchase.
Can you deduct student loan interest on your tax return?
The federal student loan “pause” is coming to an end on Aug. 31 after more than three years. If you have student loan debt, you may wonder whether you can deduct the interest you pay on your tax return. The answer may be yes, subject to certain limits. The deduction is phased out if your adjusted gross income exceeds certain levels. The maximum amount of student loan interest you can deduct per year is $2,500. For 2023, the deduction is phased out for single taxpayers with AGI between $75,000 and $90,000 ($155,000 and $185,000 for married couples filing jointly). The interest must be on funds borrowed to cover qualified education costs of the taxpayer, a spouse or dependent.
Receive more than $10,000 in cash at your business? Here’s what you must do
Does your business receive large amounts of cash or cash equivalents? You may be required to report the transactions to the IRS. Each person engaged in a trade or business who receives more than $10,000 in cash in one transaction, or in two or more related transactions, must file Form 8300. Transactions conducted in a 24-hour period are considered related. “Cash equivalents” include cashier’s checks, bank drafts, traveler’s checks and money orders. In addition to filing Form 8300 on paper, e-filing is an option. The form is due 15 days after a transaction. These rules apply to individuals, companies, corporations, partnerships, associations, trusts and estates. Contact us with questions.