The qualified business income (QBI) deduction is available to eligible businesses through 2025. After that, it’s scheduled to disappear. So if you’re eligible, you want to make the most of the deduction while it’s still on the books because it can potentially be a big tax saver.
4 Ways C Corporations Ensure “Reasonable” Compensation
If you own a C corporation, you know there’s a tax advantage to taking money out as compensation rather than as dividends. The reason: A corporation can deduct the salaries and bonuses that it pays executives, but it can’t deduct dividend payments. Therefore, if funds are paid as dividends, they’re taxed twice, once to the corporation and once to the recipient. Money paid out as compensation is taxed only once to the recipient employee.
A Strategy to Raise Your Medical Expense Deduction
With a bit of planning, you may be able to boost your itemized medical expense deduction when you file your 2024 tax return next year. Only eligible expenses exceeding 7.5% of your adjusted gross income are deductible.
It’s not an easy hurdle to clear short of a major medical disaster, which, of course, you want to avoid. But you can use a strategy called “bunching” medical expenses to exceed the 7.5% threshold.
Have You Recently Reviewed Your Life Insurance Needs?
At one time, life insurance played a much more significant part in an estate plan than it does now. Why? Families would often use life insurance payouts to pay estate taxes. But with the federal gift and estate tax exemption at $13.61 million for 2024, far fewer families currently are affected by the estate tax.
Deductions vs. Credits: What’s the Difference?
One of the most common misunderstandings about filing an income tax return is the difference between deductions and credits. Deductions reduce the amount of a taxpayer’s income before tax is calculated. For example, on your individual return, you can either take the standard deduction or itemize deductions if it will reduce your taxable income more. Credits, on the other hand, reduce the actual tax due, dollar-for-dollar, generally making them more valuable than deductions.
Section 179 Expensing and Bonus Depreciation Pitfalls
If eligible, you can elect to use Section 179 expensing or bonus depreciation to deduct a large portion of the cost (and, in some cases, the full cost) of eligible property in the year it’s placed in service. Alternatively, you may follow regular depreciation rules and spread deductions over several years or decades, depending on how the asset is classified under the tax code.
Did You Get Married in 2023?
Your filing status options for your 2023 income tax return depend on your marital status on December 31. The married-filing-jointly status is typically the most beneficial way for married taxpayers to file, but it’s a good idea to take a “what-if” look at the married filing separately status.
Individual Taxpayers: The Year in Review
As we close out the year and get ready for tax season, here’s what individuals and families need to know about tax provisions for 2022.
Secure a Business Bad Debt Deduction on Your Tax Return
Is your business having trouble collecting payments from clients or vendors? You might be able to claim a bad debt deduction on your tax return. But if you hope to take the deduction on your return for this year, you’ll have to get busy because you must be able to show that you’ve made a “reasonable” effort to collect the debt.
Tax Planning vs. Tax Preparation: What is the Difference?
Many people assume tax planning is the same as tax preparation, but the two are quite different. Let’s take a closer look: