Individual Tax

2019 Annual Contribution Limit Increase for Retirement Plans

This week the IRS announced increases to the annual contribution limits for 401(k) and IRA accounts, effective January 1, 2019.   Both limits increased by $500, so the new annual contribution limit is $19,000 for 401(k) plan accounts and $6,000 for IRA’s.

For detail on what else changed see the IRS news release here.

By |November 5th, 2018|Categories: Individual Tax, IRS, Retirement Planning|Comments Off on 2019 Annual Contribution Limit Increase for Retirement Plans

IRS Clarifies Rules Regarding When Rental Property Activity Should be Reported as a Schedule Business

According to the IRS, not all rental property activity should be reported on Schedule E.   If the property owner provides “substantial services” to short-term renters, the IRS says that the rental activity should be reported on Schedule C, and that the property owner must pay self-employment taxes on the income.   If there is a loss, it can be fully deducted without regard for the passive loss limitation rules.   Substantial services are defined by the IRS as:   regular cleaning, changing linens, or maid services…furnishing of utilities or cleaning of public areas do not count as substantial services.  For example, if you rent out a room in your house on Airbnb to short-term renters, the “substantial service” requirement can be satisfied if you are cleaning and changing linens after each short-term […]

By |September 15th, 2018|Categories: Business Tax, Individual Tax, IRS, Real Estate|Comments Off on IRS Clarifies Rules Regarding When Rental Property Activity Should be Reported as a Schedule Business

With new regulations IRS all but sinks the ship on state workarounds for the $10,000 SALT limit

On August 24th 2018 the IRS issued proposed regulations regarding recent state’s creation of state tax credit programs in exchange for charitable contributions. A number of states, including California, have proposed creating charitable funds where taxpayers would receive a state tax credit for contributions to the fund. The IRS has taken the position that these proposed transactions are quid pro quo and that a full charitable deduction is not allowed. The tax credits constitute return benefits and therefore reduce the amount of the charitable contribution. There are a few exceptions, one for state tax deductions along with a De Minimus exception for credits that do not exceed 15% of the taxpayer’s payment. A taxpayer may also decline the tax credit to receive the full charitable contribution

If you would like to […]

By |August 26th, 2018|Categories: BCo Community News, Individual Tax|Comments Off on With new regulations IRS all but sinks the ship on state workarounds for the $10,000 SALT limit

Final regulations regarding substantiation for charitable contributions

On July 30th 2018 the IRS issued final regulations relating to the substantiation and reporting requirements for charitable contributions which address substantiation requirements for contributions of more than $500 and of clothing and household items.

In order to substantiate a charitable contribution the following substantiation requirements must be met:

Cash Contributions

Under $250

  • Bank record or written communication from the charity
    • Blank pledge cards provided by the donee organization are not sufficient substantiation

$250 or more

  • Obtain contemporaneous written acknowledgement from the donee organization

 Non-cash Contributions

Donated property must be in good condition or better.

Under $250

  • Obtain a receipt or keep reliable records
    • Reliable records must show the following information:
      • Name and address of the donee
      • Date of the contribution
      • Description of the property in sufficient detail including the condition
      • Fair market value on the […]
By |August 10th, 2018|Categories: Accounting & Bookkeeping, Individual Tax, IRS, Nonprofit Organizations|Comments Off on Final regulations regarding substantiation for charitable contributions

Intentionally Defective Grantor Trusts

An Intentionally Defective Grantor Trust (IDGT) is commonly used as an effective tool for estate tax planning.

An IDGT is disregarded for income tax purposes, but it is a legally valid irrevocable trust for estate tax purposes.   Appreciating assets are usually transferred to an IDGT out of the grantor’s taxable estate.  Once the assets are transferred and owned by the IDGT, they are no longer a part of the grantor’s taxable estate.  Still the grantor of the IDGT retains some rights and reports the earnings from the IDGT’s assets on his/her personal tax return, while all of the investment income and appreciation remains within the IDGT.

IDGTs are complex in nature, but this article published by the CalCPA Education Foundation provides a very nice overview of how IDGTs work and can be beneficial for estate tax planning purposes.   To […]

By |July 28th, 2018|Categories: Individual Tax, Trusts and Estates|Comments Off on Intentionally Defective Grantor Trusts