Revenooer Rants: Tax season never ends
October 14, 2014
Although the final extension date for 2013 hits this week, prudent taxpayers are already planning for their 2014 tax bite, as year end approaches.
Following are a few observations which may be of interest:
Remember that long-term capital gain income is favorably taxed in comparison to "ordinary" income. The rate most folks recognize is the maximum 20 percent rate which applies if the income in question would otherwise be taxed at 39.6 percent if it were "ordinary." But even better yet, the rate applicable to long-term capital gains might be even lower: 15 percent if the income were ordinary and otherwise taxed at a rate of between 15 percent and 39.6 percent. And the rate could even be zero percent if the income would be taxed at a rate of 10 percent or 15 percent if it were ordinary income! (Got all that?)
Unless Congress changes the rules (Who knows – they are so good at doing just that on their way to a New Year's Eve party when it's too late for taxpayers to plan!), for tax years beginning in 2014, the maximum amount of fixed asset purchases which may be expensed in full (under Code Section 179) is $25,000. For 2013, the dollar limit was $500,000.
And again – unless Congress extends the current rule, property bought and placed in service in 2014 no longer qualifies for the 50 percent bonus first year depreciation deduction.
Start pushing your pencil now, and beware the implications of the dreaded alternative minimum tax (AMT). A decision to accelerate an expense or defer income may work for "regular" tax purposes, but may allow the AMT to nonetheless kick in.
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Another favorable provision which applied in 2013 will not be available this year unless Congress acts soon. Previously, individuals aged 70-1/2 or older could make charitable contributions directly from their IRA without having the amount of their contribution first included in their adjusted gross income. Such a move proved favorable to many, in comparison to first including the IRA distribution in income and then making the donation and claiming the related deduction. The uncertainty in this area may motivate some to postpone the required minimum distribution from their IRA until very late in the year, in hopes that Congress does extend this potentially favorable provision.
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation. Jeff Quinn is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He welcomes comments at email@example.com.
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