tax planning - Linkenheimer LLP CPAs & Advisors

Proactive Year-End Tax Planning: Navigating 2023’s Tax Landscape with Linkenheimer LLP

As the year winds down, businesses are presented with the critical task of year-end tax planning — a complex endeavor, especially with the ever-evolving tax regulations and economic climate of 2023. For savvy business owners, this period is not just about compliance, but an opportunity for tax optimization. Linkenheimer, with its deep understanding of current tax laws and dedication to client success, stands ready to guide businesses through the maze of tax planning strategies.

Strategies for Year-End Tax Planning

Maximize Deductions and Credits

Businesses should review their expenditures throughout the year to ensure they capitalize on all available deductions and credits. This could include investments in energy-efficient equipment, research and development expenses, and charitable contributions.

Defer Income and Accelerate Expenses

If your business anticipates a lower tax rate in the next year, it may be beneficial to defer income to the following year and accelerate expenses into the current year, thereby reducing taxable income.

Consider Equipment Purchases

Section 179 and Bonus Depreciation are potent tools for businesses. Evaluate your need for new equipment or technology upgrades — purchasing before year-end can result in substantial tax savings.

Assess Inventory Strategy

Review your inventory management strategies. If you use the accrual method, consider […]

By Linkenheimer LLP|2023-11-15T19:05:19+00:00November 15th, 2023|tax planning, year-end|0 Comments

A Tax-Smart Way to Develop and Sell Appreciated Land

Let’s say you own highly appreciated land that’s now ripe for development. If you subdivide it, develop the resulting parcels and sell them off for a hefty profit, it could trigger a large tax bill.

In this scenario, the tax rules generally treat you as a real estate dealer. That means your entire profit — including the portion from pre-development appreciation in the value of the land — will be treated as high-taxed ordinary income subject to a federal rate of up to 37%. You may also owe the 3.8% net investment income tax (NIIT) for a combined federal rate of up to 40.8%. And you may owe state income tax too.

It would be better if you could arrange to pay lower long-term capital gain (LTCG) tax rates on at least part of the profit. The current maximum federal income tax rate on LTCGs is 20% or 23.8% if you owe the NIIT.

Potential tax-saving solution

By Linkenheimer LLP|2023-08-21T18:24:54+00:00August 21st, 2023|real estate, tax planning|0 Comments

Reduce the Impact of the 3.8% Net Investment Income Tax

High-income taxpayers face a regular income tax rate of 35% or 37%. And they may also have to pay a 3.8% net investment income tax (NIIT) that’s imposed in addition to regular income tax. Fortunately, there are some ways you may be able to reduce its impact.

Affected taxpayers

The NIIT applies to you only if modified adjusted gross income (MAGI) exceeds:

$250,000 for married taxpayers filing jointly and surviving spouses,
$125,000 for married taxpayers filing separately,
$200,000 for unmarried taxpayers and heads of household.

The amount subject to the tax is the lesser of your net investment income or the amount by which your MAGI exceeds the threshold ($250,000, $200,000, or $125,000) that applies to you.

Net investment income includes interest, dividend, annuity, royalty and rental income, unless those items were derived in the ordinary course of an active trade or business. In addition, other gross income from a trade or business that’s a passive activity is subject to the NIIT, as is income from a business trading in financial instruments or commodities.

There are many types of income that are exempt from the NIIT. For example, tax-exempt interest and the excluded gain from the sale […]

By Linkenheimer LLP|2023-06-06T14:52:58+00:00June 6th, 2023|investment, tax planning|0 Comments

Answers To Your Questions About 2023 Limits On Individual Taxes

Many people are more concerned about their 2022 tax bills right now than they are about their 2023 tax situations. That’s understandable because your 2022 individual tax return is due to be filed in 10 weeks (unless you file an extension).

However, it’s a good time to familiarize yourself with tax amounts that may have changed for 2023. Due to inflation, many amounts have been raised more than in past years. Below are some Q&As about tax limits for this year.

Note: Not all tax figures are adjusted annually for inflation and some amounts only change when new laws are enacted.

I didn’t qualify to itemize deductions on my last tax return. Will I qualify for 2023?

In 2017, a law was enacted that eliminated the tax benefit of itemizing deductions for many people by increasing the standard deduction and reducing or eliminating various deductions. For 2023, the standard deduction amount is $27,700 for married couples […]

By Linkenheimer LLP|2023-02-14T16:06:12+00:00February 9th, 2023|tax deductions, tax implications, tax planning|0 Comments

Retirement Plan Early Withdrawals: Make Sure You Meet The Requirements To Avoid A Penalty

Most retirement plan distributions are subject to income tax and may be subject to an additional penalty if you take an early withdrawal. What’s considered early? In general, it’s when participants take money out of a traditional IRA or other qualified retirement plan before age 59½. Such distributions are generally taxable and may be subject to a 10% penalty tax.

Note: The additional penalty tax is 25% if you take a distribution from a SIMPLE IRA in the first two years you participate in the SIMPLE IRA plan.

Fortunately, there are several ways that the penalty tax (but not the regular income tax) can be avoided. However, the rules are complex. As the taxpayer in one new court case found, if you don’t meet the requirements, you’ll be forced to pay the penalty.

Basic rules

Some exceptions to the 10% early withdrawal penalty tax are only available to taxpayers who take early distributions from traditional IRAs, while others can only be used with qualified retirement plans such as 401(k)s.

Some examples of exceptions include:

Paying for medical costs that exceed 7.5% of your adjusted gross income,
Taking annuity-like annual withdrawals under IRS guidelines,
Withdrawing money from an […]

By Linkenheimer LLP|2023-02-09T16:18:07+00:00February 9th, 2023|retirement, tax planning|0 Comments