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Joshua Jenson, CPA

Joshua Jenson, CPA. Managing Partner Joshua Jenson, CPA, P.C. & Associates. What’s New for 2014?. Over 50 Tax Breaks Expired as of December 31, 2013!. Important Expired Business Tax Breaks Research credit Work opportunity credit 15-year cost recovery for qualified property

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Joshua Jenson, CPA

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  1. Joshua Jenson, CPA Managing Partner Joshua Jenson, CPA, P.C. & Associates

  2. What’s New for 2014?

  3. Over 50 Tax Breaks Expired as ofDecember 31, 2013! Important Expired Business Tax Breaks • Research credit • Work opportunity credit • 15-year cost recovery for qualified property • Alternative fuel credit • Bonus depreciation Important Expired Individual Tax Breaks • State & local sales tax deduction • Above-the-line tuition deduction • $250 above-the-line teacher expenses • Tax-free charitable distributions from IRA’s

  4. So, Now What?

  5. Individuals

  6. More Complex Rate Structure Seven ordinary income brackets Three capital gains brackets With the NII tax, high-income individuals face a combined tax rate of 43.4% on ordinary investment income and 23.8% on long-term capital gains. The Tax Adviser, September 2014, p. 672

  7. Phaseouts & Deductions Limitations Personal Exemption Phaseout (PEP) • Phaseout begins at $305,050 AGI for MFJ ($254,200 Single) • Phaseout ends at $427,550 AGI for MFJ ($376,700 Single) Itemized Deductions (Pease) Limitations • Threshold is $305,050 AGI for MFJ ($254,200 Single) • Reduced by lesser of 3% of excess of AGI over thresholds or 80% of total allowable itemized deductions.

  8. Net Investment Income Tax Big Impact on High-Income Individuals

  9. Only applies if MAGI is over $250,000 (married) or $200,000 (single) 3.8% Additional Tax

  10. 3.8% Net Investment Income Tax What’s included? What’s not included? Wages and SE income Active trade or business income Retirement plan distributions Unemployment SS benefits Alimony Municipal bond interest • Interest income • Dividend income • Capital gains • Rents • Royalty income • Passive business income

  11. Real Estate Professionals Pass 750 hours test Over ½ of your personal services provided were related to real estate businesses Must materially participate Key is documentation. You must be able to prove status to IRS.

  12. Double Whammy on Capital Gains

  13. Additional Medicare Tax • 0.9% on wages and SE income • MAGI over $250,000 (married) or $200,000 (single)

  14. Health Care Reform Effects for 2014 Substantiating Health Coverage Individual Shared Responsibility Provision All US citizens and legal residents required to have qualifying minimum essential health coverage starting January 1, 2014. 2014 Penalty: Greater of $95 or 1% of household income Since employer reporting pushed back to 2015, taxpayer must collect information to document coverage. Must show: • Policy terms • Who is covered • Period of time covered • Max Penalty per family = $285 • Dependent under 18 = $47.50 penalty/each

  15. Individual Tax Planning Strategies

  16. Charitable Contributions • Get Proper Documentation MUST STATE NO GOODS OR SERVICES PROVIDED • Don’t forget out-of-pocket volunteer expenses & mileage • Gifts made by credit card count too • Strategically time large donations for best tax year

  17. Retirement PlanningisEssential Moss-Adams 2014 Year-End Tax Planning Guide for Individuals, www.mossadams.com

  18. Retirement Planning Strategies Pick the Best Plan Larger deductions for 401(k) and Keogh plans…must have in place by year-end Don’t Forget the Kids Earned Income = Contribute to IRA New IRA Rollover Rules For 2015 New once-a-year limit on IRA rollovers Roth IRA Conversions Traditional IRA’s can be converted to Roth IRA’s when beneficial

  19. Flexible Spending Accounts 2014 Limit = $2,500 No More Use-or-Lose

  20. Home Office Deduction Safe Harbor • For small business owners & self-employed individuals • No more tracking actual expenses • $5/square foot of home office space • Maximum deduction = $1,500/year

  21. Businesses

  22. Changes to Section 179 Deduction 2014 Limit = $25,000 Watch Out for the Phase-Out If purchases exceed $200,000, the deduction is decreased dollar-for-dollar above the threshold. SUV & Trucks over 6,000 GVWR qualify for up to $25,000 immediate deduction.

  23. Bonus Depreciation & 15-Year Depreciation Life for Qualified Property are GONE Bonus Depreciation is only available for long-production-period property and certain aircraft. Qualified Leasehold Improvements now have a depreciation recovery life of 39 years.

  24. Health Care Reform Developments • Required employer reporting mandate postponed to 2015. • Excise taxes postponed: • 50-99 FTE = effective for 2016 • 100 or more FTE = effective for 2015 • Avoid the excise taxes by offering coverage to 70% of employees. • Coverage must still meet requirements for affordability & minimum value.

  25. JJ’s Strategy for Choosing Right Entity Form

  26. Business Tax Planning Strategies

  27. Push Income, Pull Expenses

  28. Reimburse Mileage

  29. Charitable Contributions Because charitable contributions are itemized deductions, they may be limited or phased out due to Pease limitations. Sponsor projects or programs through a business instead. There are no phase-outs on that!

  30. New Tangible Property Regulations Key Provisions: • Building & structural components considered 1 unit • Safe harbor provision for small business taxpayers for qualified real property • De minimis rules added • $5,000 with AFS • $500 without AFS • Safe harbor for routine building maintenance Effective 1/1/14 Strategies: • Use safe harbors • Elect to recognize loss on partial disposition of asset annually • Follow your financial statement capitalization policy for purchases set in the policy implemented • Re-evaluate issue each year to determine policy limits and elections

  31. Estates, Trusts, & Gift Tax

  32. 2014 Limits Estate Exclusion Amount $5,340,000 Gift Tax Limit $14,000

  33. For 2014, the 3.8% tax is imposed on the lesser of the undistributed net investment income for the tax year or the excess of the AGI over $12,150. • Net investment income includes interest, dividends, annuities, royalties, rents not derived in the ordinary course of trade or business, net income from passive activities, net gain on disposition of passive activity property. Net Investment Income Tax Impact on Estates & Trusts • Final regulations exclude certain estates & trusts. • Business trusts are business entities and are not subject to the NII at the entity level. • Charitable remainder trusts are not subject at the entity level, but distributions from a CRT to the annuity or unitrust recipient are subject to the tax. • Foreign estates and nongrantor trusts are also exempt.

  34. Estate, Trust, & Gift Tax Planning Strategies

  35. Gift-Splitting with Spouse Each spouse can give $14,000 to an individual per year That’s $28,000 that can be given and received tax-free.

  36. Final regs change method of deducting costs of trust or estates. Trustees must now split costs between those that are subject to 2% floor from costs that are not subject to the floor. • Trusts can qualify as real estate professionals. Frank Aragona Trust, 142 T.C. No. 9 (2014) Recent Developments to Consider • IRS issued PLR on incomplete grantor trusts approving the use of this strategy, which has been used to lower state/local taxes, but now may be a good strategy to reduce NII tax exposure. • New proposed regs will affect transactions of holders of appreciated property that attempt to use charitable remainder trusts to minimize gains on the sale of those assets.

  37. Tax Planning is More Important Than Ever

  38. 49.55%!!!

  39. www.irs.gov/uac/Newsroom/IRS-To-Realign-Compliance-Operationswww.irs.gov/uac/Newsroom/IRS-To-Realign-Compliance-Operations

  40. www.irs.gov/uac/Newsroom/Plan-Now-to-Get-Full-Benefit-of-Saver%E2%80%99s-Credit-Tax-Credit-Helps-Low-and-Moderate-Income-Workers-Save-for-Retirementwww.irs.gov/uac/Newsroom/Plan-Now-to-Get-Full-Benefit-of-Saver%E2%80%99s-Credit-Tax-Credit-Helps-Low-and-Moderate-Income-Workers-Save-for-Retirement

  41. http://www.irs.gov/uac/Newsroom/Scam-Phone-Calls-Continue-IRS-Unveils-New-Video-to-Warn-Taxpayershttp://www.irs.gov/uac/Newsroom/Scam-Phone-Calls-Continue-IRS-Unveils-New-Video-to-Warn-Taxpayers

  42. www.irs.gov/uac/Newsroom/In-2015,-Various-Tax-Benefits-Increase-Due-to-Inflation-Adjustmentswww.irs.gov/uac/Newsroom/In-2015,-Various-Tax-Benefits-Increase-Due-to-Inflation-Adjustments

  43. www.irs.gov/uac/Newsroom/IRS-Announces-Tax-Guidance-Related-to-Ebola-Outbreak-in-Guinea,-Liberia-and-Sierra-Leonewww.irs.gov/uac/Newsroom/IRS-Announces-Tax-Guidance-Related-to-Ebola-Outbreak-in-Guinea,-Liberia-and-Sierra-Leone

  44. www.irs.gov/uac/Newsroom/2015-PTIN-Renewal-Period-Underway-for-Tax-Professionalswww.irs.gov/uac/Newsroom/2015-PTIN-Renewal-Period-Underway-for-Tax-Professionals

  45. www.irs.gov/uac/Newsroom/IRS-Announces-2015-Pension-Plan-Limitations;-Taxpayers-May-Contribute-up-to-$18,000-to-their-401(k)-plans-in-2015www.irs.gov/uac/Newsroom/IRS-Announces-2015-Pension-Plan-Limitations;-Taxpayers-May-Contribute-up-to-$18,000-to-their-401(k)-plans-in-2015

  46. www.irs.gov/pub/irs-pdf/f1040sb.pdf

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