CPA Blog

Even if your income is high, your family may be able to benefit from the 0% long-term capital gains rate

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Published: Wednesday, 13 December 2017 10:44

Written by Raul D. Prieto, CPA

We’re entering the giving season, and if making financial gifts to your loved ones is part of your plans — or if you’d simply like to reduce your capital gains tax — consider giving appreciated stock instead of cash this year. Doing so might allow you to eliminate all federal tax liability on the appreciation, or at least significantly reduce it.

Leveraging lower rates

Investors generally are subject to a 15% tax rate on their long-term capital gains (20% if they’re in the top ordinary income tax bracket of 39.6%). But the long-term capital gains rate is 0% for gain that would be taxed at 10% or 15% based on the taxpayer’s ordinary-income rate.

In addition, taxpayers with modified adjusted gross income (MAGI) over $200,000 per year ($250,000 for joint filers and $125,000 for married filing separately) may owe the net investment income tax (NIIT). The NIIT equals 3.8% of the lesser of your net investment income or the amount by which your MAGI exceeds the applicable threshold.

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Practice the fine art of inclusion at your holiday gatherings

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Published: Wednesday, 13 December 2017 10:39

Written by Phillip Strickler, CPA.CITP

It’s that time of year, business owners — a time when you’re not only trying to wind down the calendar in profitable fashion, but also preparing year-end financials and contemplating next year’s budget.

And amidst all this, you likely have a holiday employee gathering to plan. This seemingly innocuous task can be just as tricky as the rest. It’s imperative to practice the fine art of inclusion at holiday parties so everyone feels engaged and rewarded for their hard work. Here are some ways to do so:

Involve staff in the planning. Have workers of different faiths and cultures serve on your holiday party committee. Be sure to incorporate as much of their personal holiday traditions as possible or employees may feel like they wasted their time participating on this task. By sharing family customs, workers will get to know one another better.

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You may need to add RMDs to your year-end to-do list

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Published: Wednesday, 13 December 2017 10:34

Written by Phillip Strickler, CPA.CITP

As the end of the year approaches, most of us have a lot of things on our to-do lists, from gift shopping to donating to our favorite charities to making New Year’s Eve plans. For taxpayers “of a certain age” with a tax-advantaged retirement account, as well as younger taxpayers who’ve inherited such an account, there may be one more thing that’s critical to check off the to-do list before year end: Take required minimum distributions (RMDs).

A huge penalty

After you reach age 70½, you generally must take annual RMDs from your:

• IRAs (except Roth IRAs), and
• Defined contribution plans, such as 401(k) plans (unless you’re still an employee and not a 5%-or-greater shareholder of the employer sponsoring the plan).

An RMD deferral is available in the initial year, but then you’ll have to take two RMDs the next year. The RMD rule can be avoided for Roth 401(k) accounts by rolling the balance into a Roth IRA.

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Could an FSA offer the benefits flexibility you need?

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Published: Wednesday, 13 December 2017 10:29

Written by Phillip Strickler, CPA.CITP

Business owners have to make tough choices when it comes to providing benefits to their employees. Many companies, especially newer or smaller ones, may understandably prioritize flexibility. No one wants to get locked into a benefits offering that’s cumbersome to administer and expensive to maintain.

Well, there’s one possibility that has the word “flexible” built right into its name: the health care Flexible Spending Account (FSA). And these arrangements certainly offer that.

No HDHP required, employee contributions allowed

You’ve probably heard about Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs). These increasingly popular benefits options allow employees to pay for qualifying health care costs with pretax dollars. But each one comes with a critical catch: You must offer HSAs in conjunction with a high-deductible health plan (HDHP), and your business can be the only contributor to an HRA.

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