23 Aug 2022
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Does the Kiddie Tax Affect Your Family?

Roger Rossmeisl, CPA
Individual Tax Briefs
Does the Kiddie Tax Affect Your Family?

Many people wonder how they can save taxes by transferring assets into their children’s names. This tax strategy is called income shifting. It seeks to take income out of your higher tax bracket and place it in the lower tax brackets of your children. While some tax savings are available through this approach, the “kiddie tax” rules impose substantial limitations if: The child hasn’t reached age 18 before the close of the tax year, or The child’s earned income doesn’t exceed half of his or her support and the child is age 18 or is a full-time student age 19 to 23.   The kiddie tax rules apply to your children who are under the cutoff age(s) described above, and who have more than a certain amount of...

17 Aug 2022
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President Biden Signs the Inflation Reduction Act of 2022

Roger Rossmeisl, CPA
Current Events, Individual Tax Briefs, Small Business Tax Briefs
President Biden Signs the Inflation Reduction Act of 2022

On 8/16/22, President Biden signed into law the so-called Inflation Reduction Act of 2022 (H.R. 5376).  In a statement earlier, the White House said, "President Biden and Congressional Democrats have worked together to deliver a historic legislative achievement that defeats special interests, delivers for American families, and grows the economy from the bottom up and middle out". The White House is also planning an event on 9/6/22 to celebrate the enactment of the bill. The $740 billion Act is projected to raise revenue via a new 15% minimum tax on large, profitable corporations and a 1% excise tax on stock buybacks, to achieve the Democrats goal of using the budget reconciliation measure to reduce the U.S. annual deficit (i.e. not the National Debt) by approximately $300...

17 Jul 2022
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How Disability Income Benefits are Taxed

Roger Rossmeisl, CPA
Individual Tax Briefs
How Disability Income Benefits are Taxed

If you’ve recently begun receiving disability income, you may wonder how it’s taxed. The answer is: It depends. The key issue is: Who paid for the benefit? If the income is paid directly to you by your employer, it’s taxable to you just as your ordinary salary would be. (Taxable benefits are also subject to federal income tax withholding. However, depending on the employer’s disability plan, in some cases they aren’t subject to Social Security tax.) Frequently, the payments aren’t made by an employer but by an insurance company under a policy providing disability coverage. In other cases, they’re made under an arrangement having the effect of accident or health insurance. In these cases, the tax treatment depends on who paid for the insurance coverage. If your...

17 Jul 2022
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Can Individual Taxpayers Deduct Vehicle Expenses?

Roger Rossmeisl, CPA
Individual Tax Briefs
Can Individual Taxpayers Deduct Vehicle Expenses?

It’s not just businesses that can deduct vehicle-related expenses on their tax returns. Individuals also can deduct them in certain circumstances. Unfortunately, under current law, you may not be able to deduct as much as you could years ago. For years prior to 2018, miles driven for business, moving, medical and charitable purposes were potentially deductible. For 2018 through 2025, business and moving miles are deductible only in much more limited circumstances. The changes were a result of the Tax Cuts and Jobs Act (TCJA), which could also affect your tax benefit from medical and charitable miles. Fortunately, if you’re eligible to deduct driving costs, the IRS just increased the standard amounts for the second half of 2022 due to the high price of gas. Current vs. past...

16 Jul 2022
0

Five Tax Implications of Divorce

Roger Rossmeisl, CPA
Individual Tax Briefs
Five Tax Implications of Divorce

Are you in the early stages of divorce? In addition to the tough personal issues that you’re dealing with, several tax concerns need to be addressed to ensure that taxes are kept to a minimum and that important tax-related decisions are properly made. Here are five issues to consider if you’re in the process of getting a divorce. Alimony or support payments. For alimony under divorce or separation agreements that are executed after 2018, there’s no deduction for alimony and separation support payments for the spouse making them. And the alimony payments aren’t included in the gross income of the spouse receiving them. (The rules are different for divorce or separation agreements executed before 2019.) Child support. No matter when the divorce or separation instrument is executed,...

16 Jul 2022
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Your Estate Plan: Don’t Forget About Income Tax Planning

Roger Rossmeisl, CPA
Individual Tax Briefs
Your Estate Plan: Don't Forget About Income Tax Planning

As a result of the current estate tax exemption amount ($12.06 million in 2022), many people no longer need to be concerned with federal estate tax. Before 2011, a much smaller amount resulted in estate plans attempting to avoid it. Now, because many estates won’t be subject to estate tax, more planning can be devoted to saving income taxes for your heirs. Note: The federal estate tax exclusion amount is scheduled to sunset at the end of 2025. Beginning on January 1, 2026, the amount is due to be reduced to $5 million, adjusted for inflation. Of course, Congress could act to extend the higher amount or institute a new amount. Here are some strategies to consider in light of the current large exemption amount. Gifts that use...

13 Jul 2022
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Do You Have to Pay Tax on Social Security Benefits?

Roger Rossmeisl, CPA
Individual Tax Briefs
Do You Have to Pay Tax on Social Security Benefits?

Some people who begin claiming Social Security benefits are surprised to find out they’re taxed by the federal government on the amounts they receive. If you’re wondering whether you’ll be taxed on your Social Security benefits, the answer is: It depends. The taxation of Social Security benefits depends on your other income. If your income is high enough, between 50% and 85% of your benefits could be taxed. (This doesn’t mean you pay 85% of your benefits back to the federal government in taxes. It merely means that you’d include 85% of them in your income subject to your regular tax rates.) Figuring your income To determine how much of your benefits are taxed, first determine your other income, including certain items otherwise excluded for tax purposes (for...

05 Jun 2022
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Is it a Good Time for a Roth Conversion?

Roger Rossmeisl, CPA
Individual Tax Briefs
Is it a Good Time for a Roth Conversion?

The downturn in the stock market may have caused the value of your retirement account to decrease. But if you have a traditional IRA, this decline may provide a valuable opportunity: It may allow you to convert your traditional IRA to a Roth IRA at a lower tax cost. Traditional vs. Roth Here’s what makes a traditional IRA different from a Roth IRA: Traditional IRA. Contributions to a traditional IRA may be deductible, depending on your modified adjusted gross income (MAGI) and whether you (or your spouse) participate in a qualified retirement plan, such as a 401(k). Funds in the account can grow tax deferred. On the downside, you generally must pay income tax on withdrawals. In addition, you’ll face a penalty if you withdraw funds before age 59½ —...

05 Jun 2022
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The Ins and Outs of Series EE Savings Bond Taxation

Roger Rossmeisl, CPA
Individual Tax Briefs
The Ins and Outs of Series EE Savings Bond Taxation

Many people own Series E and Series EE bonds that were bought many years ago. They may rarely look at them or think about them except on occasional trips to a file cabinet or safe deposit box. One of the main reasons for buying U.S. savings bonds (such as Series EE bonds) is the fact that interest can build up without the need to currently report or pay tax on it. The accrued interest is added to the redemption value of the bond and is paid when the bond is eventually cashed in. Unfortunately, the law doesn’t allow for this tax-free buildup to continue indefinitely. The difference between the bond’s purchase price and its redemption value is taxable interest. Series EE bonds, which have a maturity period...

05 Jun 2022
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IRA Charitable Donations as an Alternative to Taxable Required Distributions

Roger Rossmeisl, CPA
Individual Tax Briefs
IRA Charitable Donations as an Alternative to Taxable Required Distributions

Are you a charitably minded individual who is also taking distributions from a traditional IRA? You may want to consider the tax advantages of making a cash donation to an IRS-approved charity out of your IRA. When distributions are taken directly out of traditional IRAs, federal income tax of up to 37% in 2022 will have to be paid. State income taxes may also be owed. Qualified charitable distributions One popular way to transfer IRA assets to charity is via a tax provision that allows IRA owners who are age 70½ or older to direct up to $100,000 per year of their IRA distributions to charity. These distributions are known as qualified charitable distributions (QCDs). The money given to charity counts toward your required minimum distributions (RMDs) but...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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