tax - Linkenheimer LLP CPAs & Advisors

Is Your Income High Enough To Owe Two Extra Taxes?

High-income taxpayers face two special taxes — a 3.8% net investment income tax (NIIT) and a 0.9% additional Medicare tax on wage and self-employment income. Here’s an overview of the taxes and what they may mean for you.

3.8% NIIT

This tax applies, in addition to income tax, on your net investment income. The NIIT only affects taxpayers with adjusted gross income (AGI) exceeding $250,000 for joint filers, $200,000 for single taxpayers and heads of household, and $125,000 for married individuals filing separately.

If your AGI is above the threshold that applies ($250,000, $200,000 or $125,000), the NIIT applies to the lesser of 1) your net investment income for the tax year or 2) the excess of your AGI for the tax year over your threshold amount.

The “net investment income” that’s subject to the NIIT consists of interest, dividends, annuities, royalties, rents and net gains from property sales. Wage income and income from an active […]

By Linkenheimer LLP|2022-09-06T20:00:08+00:00September 6th, 2022|income tax, individuals|0 Comments

Your Estate Plan: Don’t Forget About Income Tax Planning

As a result of the current estate tax exemption amount ($12.06 million in 2022), many people no longer need to be concerned with federal estate tax. Before 2011, a much smaller amount resulted in estate plans attempting to avoid it. Now, because many estates won’t be subject to estate tax, more planning can be devoted to saving income taxes for your heirs.

Note: The federal estate tax exclusion amount is scheduled to sunset at the end of 2025. Beginning on January 1, 2026, the amount is due to be reduced to $5 million, adjusted for inflation. Of course, Congress could act to extend the higher amount or institute a new amount.

Here are some strategies to consider in light of the current large exemption amount.

Gifts that use the annual exclusion

One of the benefits of using the gift tax annual exclusion to make transfers during life is to save estate tax. This is […]

IRA Charitable Donations: An Alternative to Taxable Required Distributions

Are you a charitably minded individual who is also taking distributions from a traditional IRA? You may want to consider the tax advantages of making a cash donation to an IRS-approved charity out of your IRA.

When distributions are taken directly out of traditional IRAs, federal income tax of up to 37% in 2022 will have to be paid. State income taxes may also be owed.

Qualified charitable distributions

One popular way to transfer IRA assets to charity is via a tax provision that allows IRA owners who are age 70½ or older to direct up to $100,000 per year of their IRA distributions to charity. These distributions are known as qualified charitable distributions (QCDs). The money given to charity counts toward your required minimum distributions (RMDs) but doesn’t increase your adjusted gross income (AGI) or generate a tax bill.

Keeping the donation out of your AGI may be important for several reasons. Here are some of them:

It can help you qualify for other tax breaks. For example, having a lower AGI can reduce the threshold for deducting medical expenses, which are only deductible to the extent they exceed 7.5% of AGI.
You can avoid […]

By Linkenheimer LLP|2022-05-19T19:29:11+00:00May 19th, 2022|ira|0 Comments

The Tax Mechanics Involved in the Sale of Trade or Business Property

What are the tax consequences of selling property used in your trade or business?

There are many rules that can potentially apply to the sale of business property. Thus, to simplify discussion, let’s assume that the property you want to sell is land or depreciable property used in your business, and has been held by you for more than a year. (There are different rules for property held primarily for sale to customers in the ordinary course of business; intellectual property; low-income housing; property that involves farming or livestock; and other types of property.)

General rules

Under the Internal Revenue Code, your gains and losses from sales of business property are netted against each other. The net gain or loss qualifies for tax treatment as follows:

1) If the netting of gains and losses results in a net gain, then long-term capital gain treatment results, subject to “recapture” rules discussed below. Long-term capital gain treatment is […]

By Linkenheimer LLP|2022-04-26T17:53:00+00:00April 26th, 2022|business, property tax|0 Comments

Thompson, LaMalfa Introduce Bipartisan Bill to Ensure Fire Victims Don’t Pay Taxes on PG&E Court-Ordered Trust Payments

Washington –

Today, Reps. Mike Thompson (CA-05) and Doug LaMalfa (CA-01) introduced bipartisan legislation to ensure that no fire survivors are taxed on the payments they received from the PG&E Fire Victims Trust. Following fires in 2015, 2017, and 2018, PG&E established a court-ordered trust of over $13 billion for survivors of these devastating events.

“I have heard from constituents across our community who are deeply, deeply concerned that they will face a tax burden upon receiving a payout from PG&E,” said Thompson. “This trust was set up to help people get back on their feet and recover after a destructive fire. They should not have to pay taxes on these payouts. I am proud to introduce this bill alongside Rep. LaMalfa to help our constituents receive the money they are owed, and will continue working to ensure survivors have the resources they need to recover from these tragedies.”

“Fire victims have lost homes, belongings, and for some, even their loved ones. We should not ask survivors to pay federal taxes on compensation that they will use to rebuild their lives. And we certainly should not be asking them to pay taxes on […]

By Linkenheimer LLP|2022-04-01T22:47:30+00:00April 1st, 2022|fire, Fire Relief Info, New Tax Laws|0 Comments