As a small business owner, figuring out which form of business structure to use when you started was one of the most important decisions you had to make; however, it’s always a good idea to periodically revisit that decision as your business grows. For example, as a sole proprietor, you must pay a self-employment tax rate of 15% in addition to your individual tax rate; however, if you were to revise your business structure to become a corporation and elect S-Corporation status you could take advantage of a lower tax rate.
What if there were a tool that helped you create crystal-clear plans, provided you with continual feedback about how well your plan was working, and that told you exactly what’s working and what isn’t?
Well, there is such a tool; it’s called the Budget vs. Actual Report, and it’s exactly what you need to be able to consistently make smart business decisions to keep your business on track for success.
Are you approaching retirement age and wondering where you can retire to make your retirement nest egg last longer? Retiring abroad may be the answer. But first, it’s important to look at the tax implications because not all retirement country destinations are created equal.
Self-employed taxpayers who use their home for business may be able to deduct expenses for the business use of it. Qualified persons can claim the deduction whether they rent or own their home and can use the simplified option or the regular method to claim a deduction.
One of the key tax benefits of owning a home is the ability to deduct mortgage interest. No worries, under the Tax Cuts and Jobs Act (TCJA) of 2017, you can continue to do so.
The rules state that in 2018 and going forward, you can deduct the interest on a home mortgage of $750,000 or less (this must be your principal residence). This is a change from the previous $1 million limit.
The short answer is that yes, tips are taxable. If you work at a hair salon, barber shop, casino, golf course, hotel, or restaurant, or drive a taxicab, then the tip income you receive as an employee from those services is considered taxable income. Here are a few other tips about tips:
As hurricane season gets underway—and with it, the possibility of scam groups masquerading as charitable organizations—taxpayers should know about the new tax-exempt organization search tool. Located on the IRS website, the Tax Exempt Organization Search (TEOS) tool replaces the EO Select Check tool and enables taxpayers to search and access information about tax-exempt organizations quickly. TEOS is mobile friendly as well, accessible on tablets or smartphones.
Section 965 of the Internal Revenue Code, enacted in December 2017, imposes a transition tax on untaxed foreign earnings of foreign corporations owned by U.S. shareholders by deeming those earnings to be repatriated. Foreign earnings held in the form of cash and cash equivalents are taxed at a 15.5 percent rate, and the remaining earnings are taxed at an 8 percent rate. The transition tax generally may be paid in installments over an eight-year period when a taxpayer files a timely election under section 965(h).
Under tax reform, taxpayers who itemize should be aware that deductions they may have previously counted on to reduce their taxable income have disappeared in 2018.
1. Moving Expenses
Prior to tax reform (i.e., for tax years starting before January 1, 2018), taxpayers could deduct expenses related to moving for a job as long as the move met certain IRS criteria. However, for tax years 2018 through 2025, moving expenses are no longer deductible–unless you are a member of the Armed Forces on active duty who moves because of a military order.
Tax rules on rental income from second homes can be complicated, particularly if you rent the home out for several months of the year and also use the home yourself.
There is, however, one provision that is not complicated. Homeowners who rent out their property for 14 or fewer days a year can pocket the rental income, tax-free. In other words, if you live close to a vacation destination such as the beach or mountains, you may be able to make some extra cash by renting out your home (principal residence) when you go on vacation–as long as it’s two weeks or less. Although you can’t take depreciation or deduct for maintenance, you can deduct mortgage interest, property taxes, and casualty losses on Schedule A (1040), Itemized Deductions.