As the year draws to a close, tax planning for rental properties can save you money, optimize deductions, and streamline your tax reporting for the upcoming year. Whether you have one or several rental properties, a little proactive planning can make a massive difference when it comes to your overall tax efficiency- and your stress level at tax time.
Here are 7 things you should be consider now if you own one or more rental properties.
One of the biggest benefits of owning rental property is the ability to depreciate the property's value over its useful life. But remember, when you sell, you might have to "recapture" some of that depreciation, which can increase your tax liability. Ensure you understand how much depreciation you've claimed and how it will impact your taxes upon sale.
If you're thinking about selling a property and buying another, consider a 1031 Exchange. This allows you to defer paying capital gains taxes by reinvesting the proceeds from a sold property into a like-kind property.
Take a detailed look at your rental income and all associated expenses. This isn't just about calculating profitability, but also about optimizing tax deductions. Ensure you've recorded all possible deductible expenses, such as maintenance costs, property management fees, and mortgage interest.
If you anticipate higher income this year and want to reduce your taxable income, consider prepaying some of next year's expenses. This can include items like property taxes, insurance, or even utility bills. Prepaying can offer a financial cushion and help lower this year’s tax bill.
If you have passive activity losses (when your operating expenses exceed your rental income), remember they can only offset passive activity income. Unused passive losses can be carried forward to offset future passive income or claimed when you sell the property.
Tax laws, especially those surrounding real estate, change frequently. If you have one or more rental properties, be sure to engage with a CPA who has expertise in tax planning and strategy for rental investments to ensure you're leveraging every possible benefit and staying compliant.
While DIY for tax preparation can be tempting, professional advice will help you maximize the return on your investment and minimize surprises and expensive tax headaches.We’re here to help. At Iota Financial, we specialize in guiding rental property owners through the maze of financial planning and tax optimization. Schedule a complimentary consultation, and head into the new year with confidence.
Tax deductions can help businesses and individuals save money by reducing your taxable income, thereby reducing your tax bill.
Let’s look at some of the most common deductions for both businesses and individuals. By thinking about these things now, you will thank yourself in the spring when tax season hits. Why?
First, you will save yourself from the feeling of overwhelm when it comes to gathering documentation in the new year. Also, by doing end of year tax planning, your CPA can also uncover specific areas that you can maximize before 12/31, minimizing your overall tax burden.
The tax code is complex, and there are many different rules and limitations that apply to tax deductions. It is always best to consult with a CPA who can help you with tax planning and strategy to ensure that you are taking all of the deductions that you are eligible for.
Want to make sure you are maximizing everything you can for this tax year? Schedule a complimentary consultation with us today.
Charitable giving, the act of donating money, goods, or time to help others, is not just a good deed but also a savvy financial move. Let’s explore how you can make a difference while also being strategic about enjoying some tax perks.
Imagine helping a local school purchase new computers for their lab, or supporting a food bank that ensures no family in your community goes to bed hungry. Your contributions make a tangible impact! Moreover, for you, the giver, the IRS acknowledges your kindness by allowing you to lower your taxable income through deductions. And if you’re a business, your charitable acts shine a positive light on your brand.
When you donate to eligible organizations, you can deduct those contributions from your taxable income. But remember, there are rules to follow and caps on how much you can deduct, so it’s important to understand how they work to plan accordingly.
Your heart is in the right place, but ensure your donations are too! Giving to qualified charitable organizations means your contributions are put to good use and are recognized by the IRS. These organizations typically include non-profits, religious organizations, and educational institutions. A quick check on the IRS website can confirm their status.
Whether it’s donating cash, gently used items, or even stocks, your contributions matter. If you don’t have a cause or charity that is near and dear to you alread, you might consider establishing a donor-advised fund, which allows you to contribute cash, securities, and other assets to a charitable fund. This way, you can recommend grants to your favorite charities over time, spreading out the impact of your giving.
Keeping a tidy record of your donations is essential. Whether it’s a receipt from a cash donation or a note acknowledging your non-cash contributions, having clear documentation ensures you’re ready when tax season rolls around. Organize and store these records safely – they’re your ticket to claiming your deductions smoothly!
When tax season arrives, itemizing your deductions is the key to claiming your charitable contributions. For cash donations, they will be itemized on Schedule A. The IRS provides guidelines for limitations on cash contributions and qualified contributions here.
For non-cash donations exceeding $500, IRS Form 8283 is required. Be meticulous and avoid common pitfalls, like overvaluing donated items, to ensure your filing process is smooth.
Let’s assume you are a small business owner who donated 10% of your annual profits to a local children’s hospital. Not only does your contributions aid the hospital in purchasing essential medical equipment, but you reduce your taxable income, saving your business potentially thousands in taxes.
Or, perhaps you’re in a position to donate stocks to a non-profit organization that is close to your heart. Not only will the organization benefit, but it may also be a way to avoid capital gains tax on these assets.
While tax laws might change, charitable giving is a journey of generosity that remains constant. This is an ideal time of year to be thinking strategically about charitable donations. Consult your CPA to explore the best strategy for your personal situation, and position yourself to make a positive impact on your community as well as your tax bill.
Questions? We’re here to help. Call us at (404) 668-4713.
The phone rings. It's your CPA. "I've been reviewing your inheritance situation and I have some concerns," he says. Your heart sinks. You just received word that a distant relative left you their vacation home and IRA. This windfall was supposed to be a blessing, not a burden.
But your CPA starts peppering you with questions. Should the property be sold or rented? There are tax implications in both cases. How will the inherited IRA impact your current retirement strategy? He needs to consult with your financial advisor before finalizing your returns.
You contact your advisor, who asks even more questions. Capital gains on the property sale? Required minimum distributions from the IRA? He needs to talk to your CPA first.
You're stuck in the middle, endlessly relaying messages back and forth. A simple inheritance has turned into a complex maze of planning. If only your CPA and financial advisor could collaborate directly, instead of treating you like a carrier pigeon.
But what if there was another way? Imagine working with a firm that combines financial and tax planning, tax preparation, and wealth management under one roof. Where your CPA and advisor sit down together, face to face, mapping out a cohesive strategy. No dropped balls. No communication lag. Just seamless coordination on YOUR behalf.
This dream is now a reality. Iota Financial's integrated team of tax and finance experts provide comprehensive inheritance guidance. They anticipate issues, ask the right questions, and deliver tailored solutions to protect and optimize your windfall. You're treated like family, not just another file passing desk to desk.
So, what are some of the key considerations when you get that windfall? The stakes are high when inheriting property and retirement assets. One wrong move can lead to costly taxes and lost opportunities.
If you've inherited real estate like a vacation home, there are several factors to weigh:
As you can see, the property decision is not straightforward. An experienced advisor can project cash flows from rent vs. sale to help determine the optimal path.
Inheriting someone's IRA or 401(k) also raises planning issues:
Proactive planning of the inherited IRA is vital to minimize taxes and maximize your legacy benefit.
Other key inheritance issues involve estate taxes, setting up trusts, gifting funds to heirs, and estate law. It's critical to work with a team that understands both the financial and tax complexities.
Our goal is simple - maximize the value of your inheritance while minimizing taxes and headaches. No more coordinating separate advisors or deciphering perplexing jargon. We speak your language and have your best interests in mind. Contact us today to schedule a free consultation.
Taxes can make anyone’s head spin. But people who have multiple income streams, investments, or otherwise complex financial situations have complex tax liabilities to deal with that most people have never even heard of. From the alternative minimum tax (AMT) to taxes on investment income, the tax rules get really tricky for high net worth individuals.
Here are a few of those complex tax liabilities and how they impact your wealth, especially when they are not properly addressed with an experienced tax planner.
One mind-bending tax is the “alternative minimum tax” or AMT. With this tax, you have to calculate everything twice- once under the normal rules and then again under the AMT rules. You then must pay the higher of the two amounts. You pay whichever total is bigger. Because of the complicated math, many families end up owing more tax than they expected with AMT.
Another tax headache comes from investment earnings. Individuals making over $200,000 per year or couples over $250,000 pay an extra 3.8% tax on top of taxes on investment earnings like stock sales, bond interest, dividends from companies, and rental income. There are also complex rules about what rental expenses you can deduct.
Some industries, like investment management, have their own tax rules, too. Ever heard of “carried interest”? It’s bonus profits that venture capital, private equity, and hedge fund partners get based on their returns. Right now, this income is taxed at low rates meant for long-term investments. But this tax break “loophole” could go away, complicating things for investment pros.
Estate taxes when inheriting money and the evolving rules around cryptocurrency are other areas with complex taxes for high net worth individuals.
As you can see, high net worth individuals deal with intricately complex tax situations that most ordinary taxpayers never need to think twice about. But complexity breeds high tax liability when not addressed properly.
Making reactive moves close to tax time by harvesting some losses or bunching charitable contributions often won't be enough to materially minimize taxes owed given the obscurity and intricacy of these rules.
That's why effective tax planning needs to start early and consider the implications of these complex situations when making financial decisions. For instance, an experienced tax advisor can recommend setting up a trust or gifting assets to heirs at lower valuations to reduce estate and gift taxes down the road. Or they may advise a taxpayer to convert a vacation property to a rental to take advantage of passive activity loss rules.
Catching capital losses in downturns, maximizing retirement plan contributions, and donating appreciated shares to charity can also produce substantial tax savings with proper timing. But most importantly, knowledgeable tax planning experts know how to steer around complex tax pitfalls and ever changing regulations to help clients legally minimize taxes owed while still meeting their other financial priorities.
Don't wait until you've been stuck with a huge tax bill from obscure regulations to seek out expert help. Reach out now to get personalized tax minimization strategies in place before year-end.
An ounce of proactive planning is worth a pound of reactive fixes when it comes to taming complex tax liabilities. With the right guidance, you can feel confident that you are maximizing your wealth while still meeting your tax obligations.
If you've ever wondered why Georgia has become such a hotspot for film production, the answer might be more financial than cinematic. Georgia film tax credits aren’t just benefiting filmmakers- they are also benefiting savvy investors.
Imagine you're a filmmaker, and you've just wrapped up shooting your latest blockbuster in the beautiful state of Georgia. Beyond the state's picturesque locations, there's another sweet deal waiting for you: the Georgia film tax credits.
In simple terms, the Georgia film tax credit is a financial incentive offered by the state to encourage film and television productions. For every dollar spent on qualified expenditures in Georgia, a production can earn a tax credit. This means if you're spending money on production costs within the state, you're also earning a discount on your taxes.
But here's where it gets even more interesting.
Yes! If you're a filmmaker and you've earned more tax credits than you can use (maybe because your tax liability isn't that high), you're not stuck with them. You can sell them to someone else. It's like having a golden ticket that you can pass on to someone else for a price.
Selling these tax credits isn't just a matter of finding a buyer and handing them over. There are rules to ensure everything is above board.
1. Verification: Before selling, the production needs to be audited by the Georgia Department of Revenue. They'll check to ensure all the claimed expenditures are legit.
2. Transfer: Once verified, the tax credits can be transferred to a Georgia taxpayer. This means you can't sell them to your cousin in New York. They have to be transferred to someone who pays taxes in Georgia.
3. One-time Transfer: These credits can only be sold once. So, once you've sold them, the buyer can't resell them.
If you're wondering who would want to buy these tax credits, the answer is pretty much any individual or business with a tax liability in Georgia. Let's say you're a business owner in Georgia, and you've had a profitable year. Come tax time, you're looking at a hefty tax bill. But if you buy some of these film tax credits, you can reduce your tax liability. It's a win-win.
Here’s an example: Assume you are a filmmaker who shot a documentary in Georgia. After wrapping up, you realize you have $100,000 in tax credits but only a $20,000 tax liability. On the other side, there's a restaurant owner in Atlanta with a $150,000 tax liability. You can sell your excess tax credits to the restaurant owner, reducing his tax bill. You get some cash, and the restaurant owner saves on taxes. Both are happy!
Finding Georgia film tax credits involves a mix of networking, research, and sometimes, a bit of luck. But with the potential savings in taxes, it's definitely worth the effort. Here are some sources for uncovering them:
Questions about Georgia film tax credits? Let’s talk. We can walk you through the process and help you minimize your tax liability.
Intelligent tax planning is key to maximizing your wealth, but where do you start? Our comprehensive tax planning process helps clients like you strategically minimize taxes and align with their financial goals.
Our tax planning journey begins with a short 15 minute call to understand your unique financial situation and objectives. We’ll have an open discussion about your income sources, assets, investments, liabilities, and pain points.
Are you a business owner seeking to reduce self-employment tax burdens? Do you hold appreciated assets you want to strategically divest to minimize capital gains? Is a portion of your portfolio invested in complex partnerships requiring passive loss planning?
Gaining insight into your specific scenario allows us to assess areas ripe for tax savings and begin crafting a strategy tailored to you. Our goal is to identify opportunities to implement tax planning best practices and principles.
Next, we’ll schedule an in-depth 60-90 minute tax planning meeting. We’ll conduct a comprehensive review of your financial landscape, including income, investments, assets, and liabilities. This enables a clear understanding of your current tax obligations and risks.
We’ll also explore short and long-term financial aspirations. Do you hope to retire early? Fund a grandchild’s education? Leave an estate for charitable causes? Your goals inform proactive tax planning approaches.
Additionally, we’ll collaborate on your latest tax returns to pinpoint improvement areas. Are you overpaying by missing deductions? Could you time capital gains more beneficially? We find every opportunity to legally cut your tax burden.
Our team will then synthesize the findings into a tailored tax minimization plan outlining specific tax planning strategies for your situation. We partner to implement prudent techniques maximizing deductions, credits, income deferrals, and more.
Tax planning is not a one-and-done engagement! We schedule periodic check-ins to keep your plan optimized as your financial landscape evolves. Income fluctuations, major purchases, retirement, and other life changes can profoundly impact tax liabilities.
For instance, if you receive a surge in income from selling a business, we can explore tax deferral or mitigation strategies. Or if you downsize homes, we’ll ensure you maximize available real estate tax deductions. We’ll update your plan to reduce your evolving tax obligations.
Regular communication ensures no stone goes unturned when legally minimizing your lifetime tax burden. Our CPAs stay vigilant, so you can feel confident you’re optimizing wealth retention and transfer.
We take a hands-on, personalized approach to ongoing tax planning. We become familiar with your unique financial profile, then collaborate to build a strategic multi-year roadmap aimed at legally minimizing tax impacts.
Through consistent communication, we help you expertly navigate complex, ever-changing tax codes to maximize savings. We also collaborate with your financial advisor to align planning with your investment portfolio and legacy goals.
Tax planning is our passion. We partner with clients through life’s changes and challenges to thoughtfully plan for short and long-term tax efficiency. Schedule a 15 minute conversation today, or call us at (404) 668-4713.
As a Certified Public Accountant (CPA), I appreciate the unique financial landscape that people with complex financial and tax situations navigate. Let's explore the critical role of tax planning and how it can significantly influence your wealth management strategy.
In the sophisticated world of wealth management, tax planning serves as a key instrument to discover hidden opportunities that can substantially enhance your financial standing. Consider a high net worth individual who, due to a lack of awareness about available tax credits and deductions, fails to optimize their wealth. With the assistance of a proactive tax advisor, they can identify tax-saving opportunities that align with their financial objectives.
This approach not only protects their wealth but also fosters its growth. Through effective tax planning, taxpayers can maximize their financial potential, creating a robust portfolio that ensures long-term prosperity.
The intricate nature of tax laws, regulations, and obligations can be daunting for anyone, not to mention the fact that tax laws change frequently. When tax compliance becomes a burden, it can distract from wealth management and growth strategies.
However, with the expertise of a tax CPA who proactively provides advice based on your specific situation, you can navigate these complexities with ease.
Effective tax planning is key to wealth optimization. With a well-crafted plan, you can align your financial decisions with your wealth management goals. Understanding when to invest, divest, or restructure your portfolio becomes less of a guessing game. The right tax strategy will allow you to minimize your tax liability and maximize your wealth.
Tax strategy is not a one-size-fits-all solution. A competent advisor will not only analyze past financial data but also help you craft a future-oriented plan.
Every financial situation is unique, requiring a tailored approach based on financial goals and needs. This necessitates a relationship with regular check-ins to assess the effectiveness of the plan. An annual meeting with your tax advisor is insufficient for achieving substantial growth.
You deserve a proactive CPA to assist you in making strategic decisions aligned with your wealth management goals. Call us today to schedule a complimentary consultation at (404) 668-4713, and let us help you secure the health and longevity of your financial portfolio.
Keeping your personal finances separate from your business finances is essential as a business owner. Mixing the two can lead to confusion, financial problems, and even legal issues. Below are some factors to consider when evaluating whether to divide your business and personal financial accounts.
Separating your finances provides legal protection and ensures that your business operates as a legitimate entity. This gives your business a solid foundation and allows you to focus on growing your business. If your business is incorporated, this separation of finances is required to stay compliant.
Keeping your business and personal finances separate makes it easier to file your taxes. It “keeps the books clean,” so to speak. By keeping separate accounts, you can easily track your business expenses vs. personal expenses and avoid any confusion during tax season.
With separate accounts for your personal and business finances, you can easily track your income, expenses, and profits, giving you a clear picture of your business's financial health. This allows you to manage your cash flow more effectively and make informed decisions about your business. Lenders tend to look favorably on businesses with clear cash flow streams.
Managing your money in separate accounts can even help improve your professional image; it shows that you are organized, ethical, and committed to the financial health of your business. This can be especially important when dealing with clients, partners, or investors who want to see that you have your financial affairs in order.
Overall, separating your finances is a positive step towards achieving your business goals. It's a sign of your dedication to success. Call us today to schedule a complimentary consultation at (404) 668-4713 and let us help you secure the health and longevity of your business.
For Americans who receive regular paychecks from their companies and an annual W-2, you are most likely not making estimated tax payments. Taxes are withheld from each paycheck, and then you file your taxes each April and either get a refund, or potentially owe a balance due.
The responsibilities for W-2 employees and business owners are much different. In order to stay in compliance, business owners must make estimated quarterly tax payments. Even if you have a ‘side hustle,’ you should be making estimated tax payments.
The federal government treats income tax as a ‘pay as you go’ system. That means business owners, those that participate in the gig economy, independent contractors, and freelancers are required to pay estimated taxes on income earned during the year. Investors and retirees should also make these payments since a significant portion of their income is not subject to withholding.
Generally, sole proprietors, partners, and S Corp shareholders have to make quarterly tax payments if they expect to owe a tax of more than $1,000 when their taxes are filed.
These estimated tax payments are due 4 times a year. The dates for 2023 are:
It’s important to pay quarterly tax payments on time to avoid penalties, even if you are ultimately owed a tax refund. Business owners can also be assessed a penalty for underpaying their quarterly tax payments.
It doesn’t have to be scary. To make sure that you are paying the right estimated quarterly amounts, the best thing you can do is to work with a proactive CPA who will help you size up your estimated income minus estimated expenses to determine what you should pay quarterly. Working closely with your CPA will also help you avoid surprises that no one enjoys at tax time.
Business owners deserve to reach their full potential without being limited by what they don’t know. By enlisting the help of a tax professional, you’ll be free to focus on building and enjoying your business with confidence.