benefits - Linkenheimer LLP CPAs & Advisors

You May Have to Pay Tax on Social Security Benefits

During your working days, you pay Social Security tax in the form of withholding from your salary or self-employment tax. And when you start receiving Social Security benefits, you may be surprised to learn that some of the payments may be taxed.

If you’re getting close to retirement age, you may be wondering if your benefits are going to be taxed. And if so, how much will you have to pay? The answer depends on your other income. If you are taxed, between 50% and 85% of your payments will be hit with federal income tax. (There could also be state tax.)

Important: This doesn’t mean you pay 50% to 85% of your benefits back to the government in taxes. It means that you have to include 50% to 85% of them in your income subject to your regular tax rates.

Calculate provisional income

To determine how much of your benefits are taxed, you must calculate your provisional income. It starts with your adjusted gross income on your tax return. Then, you add certain amounts (for example, tax-exempt interest from municipal bonds). Add to that the income of your spouse, if you file jointly. […]

By Linkenheimer LLP|2020-09-03T20:03:49+00:00July 8th, 2019|income tax, social security|0 Comments

Many Tax-Related Limits Affecting Businesses Increase for 2019

A variety of tax-related limits affecting businesses are annually indexed for inflation, and many have gone up for 2019. Here’s a look at some that may affect you and your business.

Deductions

Section 179 expensing:
- Limit: $1.02 million (up from $1 million)
- Phaseout: $2.55 million (up from $2.5 million)
Income-based phase-ins for certain limits on the Sec. 199A qualified business income deduction:
- Married filing jointly: $321,400-$421,400 (up from $315,000-$415,000)
- Married filing separately: $160,725-$210,725 (up from $157,500-$207,500)
- Other filers: $160,700-$210,700 (up from $157,500-$207,500)

Retirement plans

Employee contributions to 401(k) plans: $19,000 (up from $18,500)
Catch-up contributions to 401(k) plans: $6,000 (no change)
Employee contributions to SIMPLEs: $13,000 (up from $12,500)
Catch-up contributions to SIMPLEs: $3,000 (no change)
Combined employer/employee contributions to defined contribution plans (not including catch-ups): $56,000 (up from $55,000)
Maximum compensation used to determine contributions: $280,000 (up from $275,000)
Annual benefit for defined benefit plans: $225,000 (up from $220,000)
Compensation defining “highly compensated employee”: $125,000 (up from $120,000)
Compensation defining “key employee”: $180,000 (up from $175,000)

Other employee benefits

Qualified transportation fringe-benefits employee income exclusion: $265 per month (up from $260)
Health Savings Account contributions:
- Individual coverage: $3,500 (up from $3,450)
- Family coverage: $7,000 (up from $6,900)
- Catch-up contribution: $1,000 (no change)
Flexible Spending Account contributions:
- Health care: $2,700 (up from $2,650)
- Dependent care: $5,000 (no change)

Additional rules apply to these […]

By Linkenheimer LLP|2019-01-22T18:19:45+00:00January 22nd, 2019|business, deduction, deductions, retirement, tax planning|0 Comments

Selling Your Business? Defer — and Possibly Reduce — Tax with an Installment Sale

You’ve spent years building your company and now are ready to move on to something else, whether launching a new business, taking advantage of another career opportunity or retiring. Whatever your plans, you want to get the return from your business that you’ve earned from all of the time and money you’ve put into it.

That means not only getting a good price, but also minimizing the tax hit on the proceeds. One option that can help you defer tax and perhaps even reduce it is an installment sale.

Tax benefits

With an installment sale, you don’t receive a lump sum payment when the deal closes. Instead, you receive installment payments over a period of time, spreading the gain over a number of years.

This generally defers tax, because you pay most of the tax liability as you receive the payments. Usually tax deferral is beneficial, but it could be especially beneficial if it would allow […]

By Linkenheimer LLP|2018-11-06T16:25:36+00:00November 6th, 2018|business, liability, tax, tax implications, tax planning|0 Comments

529 Plans Offer Two Tax-Advantaged Education Funding Options

Section 529 plans are a popular education-funding tool because of tax and other benefits. Two types are available: 1) prepaid tuition plans, and 2) savings plans. And one of these plans got even better under the Tax Cuts and Jobs Act (TCJA).

Enjoy valuable benefits

529 plans provide a tax-advantaged way to help pay for qualifying education expenses. First and foremost, although contributions aren’t deductible for federal purposes, plan assets can grow tax-deferred. In addition, some states offer tax incentives for contributing in the form of deductions or credits.

But that’s not all. 529 plans also usually offer high contribution limits. And there are no income limits for contributing.

Lock in current tuition rates

With a 529 prepaid tuition plan, if your contract is for four years of tuition, tuition is guaranteed regardless of its cost at the time the beneficiary actually attends the school. This can provide substantial […]

By Linkenheimer LLP|2018-10-12T22:31:46+00:00October 12th, 2018|child, education credit, expensing, New Tax Laws, savings|0 Comments

Tax-Free Fringe Benefits Help Small Businesses and Their Employees

In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay, but also appealing fringe benefits. Benefits that are tax-free are especially attractive to employees. Let’s take a quick look at some popular options.

Insurance

Businesses can provide their employees with various types of insurance on a tax-free basis. Here are some of the most common:

Health insurance. If you maintain a health care plan for employees, coverage under the plan isn’t taxable to them. Employee contributions are excluded from income if pretax coverage is elected under a cafeteria plan. Otherwise, such amounts are included in their wages, but may be deductible on a limited basis as an itemized deduction.

Disability insurance. Your premium payments aren’t included in employees’ income, nor are your contributions to a trust providing disability benefits. Employees’ premium payments (or […]

By Linkenheimer LLP|2018-10-11T18:11:23+00:00October 11th, 2018|employer, expensing, medical deduction, New Tax Laws, tax, tax implications|0 Comments