DiSabatino CPA Blog

DiSabatino CPA Blog

A blog by Michael DiSabatino CPA with topics on Tax Savings, Business, Management and more...

Estate Taxes: What EVERYONE Should Know

Most taxpayers ignore the federal estate tax, thinking they will never be touched by it. Unfortunately, you do this at your own peril. Why? Because states often have this tax AND politicians have a habit of frequently changing the rules. The best approach for all taxpayers is to understand the basics of the estate tax. Here is a quick summary of common questions you should be able to answer.

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Kiddie Tax Rate Hike Rolled Back

Parents of young children will always have plenty to worry about. New tax legislation passed at the end of 2019 eliminates at least one of these worries. The new law repeals a provision that increased the tax a child had to pay on unearned income.

Best of all, these revised "kiddie tax" rules may be claimed retroactive to 2018, when the change initially took effect. It’s as if it never happened!

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The $500,000 Homeowner Tax Break - Understand the rules now to avoid a tax surprise later

There is a large tax break that allows you to exclude up to $250,000 ($500,000 married) in capital gains on the sale of your personal residence. But making the assumption that this gain exclusion will always keep you safe from tax can be a big mistake. Here is what you need to know:

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Toss This. Not That. - Your guide to post tax-filing record retention

Tax season is over and yet another tax return has been sent off to the government. But before you close that tax file, there is still some work to do. If the IRS or state revenue department selects your return for review, you will need to be prepared. Here is what you need to know:

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Beware the Tax Torpedo - Large retirement account balances can cause Social Security tax problems

Putting off distributions and holding assets in your retirement accounts as long as possible may seem like a good idea, but waiting too long can cause a major tax problem. When you reach 70 ½, the trigger requiring minimum distributions (RMDs) from qualified retirement accounts is pulled and a potential tax torpedo is launched.

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Surprise! The Mutual Fund Tax Trap

Too often taxpayers receive tax surprises at year-end due to actions taken by mutual funds they own. What can add insult to injury is the unsuspecting taxpayer who recently purchases the shares in a mutual fund only to be taxed on their recent investment. How does this happen and what can you do about it?

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Make Your Child a Tax-Free Millionaire!

Want to jump start your child's retirement with a million dollar tax-free account? Consider this:

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Understanding Tax Terms: Pass-through Entities What are they? Why should you care?

Small business owners have a number of options on how to organize their business for tax purposes. Many small, single owner, businesses are not incorporated, and are deemed "sole proprietors", in the eyes of the IRS. Other business entities, like C corporations, are taxed as a separate entity with distributions to owners taxed a second time as dividends. Still others are deemed "pass-through" entities like S corporations, Partnerships and Limited Liability Companies (LLC).

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Those affected by Hurricane Florence get tax relief

You may be able to claim a casualty loss deduction on your tax return if you suffered uninsured or unreimbursed losses from Hurricane Florence or other recent federally declared natural disasters. But did you know you may not need to live in a federally declared natural disaster area to qualify for relief?

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Here's why your 2018 tax bill may be different

Even if you received a tax refund in 2017, there are plenty of things that can cause your taxes to rise. Consider the following big tax law changes that could affect what you owe this year:

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Kick your record-keeping skills into high gear

With all the major tax changes, it's more important than ever to make sure you're keeping the right records for tax purposes. Here are some tips.

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Reminder: Third Quarter Estimated Taxes Due - Now is the time to make your estimated tax payment

If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES. The third quarter due date is now here.

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Is amending your tax return worth it?

Before you decide to amend your tax return, ask yourself if it's necessary, especially if amending an error only saves you a few dollars.

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Reduce Your Medical Expenses: Tax smarts that make a difference

Medical expenses are on the rise. According to the Milliman Medical Index, the average family of four on an employer-sponsored plan will spend $28,000 on healthcare in 2018 – a $1,000 increase from 2017. Below are some ways you can save tax dollars when paying those medical bills:

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Hidden Back to School Tax Deductions

Summer is coming to a close and the back-to-school advertising blitz is underway. Hidden in some of those school expenses are tax deductions you can take advantage of. Here are some ways you can save:

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Common Tax Increase Surprises: "I did not owe that last year!"

Picture this: For the past few years you've received your tax return and have had a small but nice refund. Now imagine your surprise, when next year, you are required to send in a fairly big check to settle your tax bill. Believe it or not, this message is almost as hard to deliver to a taxpayer as it is to hear it. Here are some situations to watch for that can increase your tax liability:

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Alimony Tax Changes Require Planning: Law change to have dramatic tax impact in 2019 and beyond

The taxation of alimony will change drastically starting in 2019. Here’s what you need to know:

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So You Sold Your Home, Now What? Understanding the taxable gain exclusion on home sales

If you're considering selling your home or have recently sold your home, there are possible tax consequences. The good news: much of the gain on the sale of your home may be tax exempt. Here's what you need to know:

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Understanding Tax Terms: The Marriage Penalty Couples filing jointly still get the short end of the stick

There are a lot of positive things about getting married, but the IRS' marriage penalty isn't one of them.

The marriage penalty occurs when you pay more tax as a married couple than you would as two single filers making the same amount of money. It pops up again and again in the federal tax code.

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Income the IRS Can't Touch

Wouldn't it be nice to have a source of nontaxable income? You may be more fortunate than you realize. Listed here are a number of income items that the IRS does not tax.

  1. Tax-free interest. The federal government does not tax municipal bond interest. This includes bonds issued by a state or municipality. The tax-free benefit increases the higher your income, but caution must be taken to ensure the underlying municipality is not in dire financial condition.
  2. Health insurance premiums. For now, most health insurance premiums are tax free. This could change in the future to help pay for health care reform, but for most this benefit can be paid in pre-tax dollars.
  3. Income from Roth IRA and Roth 401(k) accounts. While the amounts contributed into these retirement savings accounts are taxed, any earnings made on the contributions are federal tax free as long as holding period and distribution rules are followed.
  4. Health savings accounts (HSA). Contributions and earnings in health related savings accounts are tax free as long as the proceeds in the account are used to pay for qualified health care expenses.
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