tcja - Linkenheimer LLP CPAs & Advisors

Donating Your Vehicle to Charity May Not be a Tax-Wise Decision

You’ve probably seen or heard ads urging you to donate your car to charity. “Make a difference and receive tax savings,” one organization states. But donating a vehicle may not result in a big tax deduction — or any deduction at all.

Trade in, sell or donate?

Let’s say you’re buying a new car and want to get rid of your old one. Among your options are trading in the vehicle to the dealer, selling it yourself or donating it to charity.

If you donate, the tax deduction depends on whether you itemize and what the charity does with the vehicle. For cars worth more than $500, the deduction is the amount for which the charity actually sells the car, if it sells without materially improving it. (This limit includes vans, trucks, boats and airplanes.)

Because many charities wind up selling the cars they receive, your donation will probably be limited to the […]

By Linkenheimer LLP|2020-09-03T20:03:54+00:00June 18th, 2019|charity, New Tax Laws|0 Comments

Casualty Loss Deductions: You Can Claim One Only for a Federally Declared Disaster

Unforeseen disasters happen all the time and they may cause damage to your home or personal property. Before the Tax Cuts and Jobs Act, eligible casualty loss victims could claim a deduction on their tax returns. But there are new restrictions that make these deductions much more difficult to take.

What’s considered a casualty for tax purposes? It’s a sudden, unexpected or unusual event, such as a hurricane, tornado, flood, earthquake, or fire; an accident or act of vandalism; or even a terrorist attack.

Unfavorable change

For losses incurred in 2018 through 2025, the TCJA generally eliminates deductions for personal casualty losses, except for losses due to federally declared disasters. For example, during 2019, there were presidential declarations of major disasters in parts of Iowa and Nebraska after severe storms and flooding. So victims there would be eligible for casualty loss deductions.

Note: There’s an exception to the general rule of allowing casualty loss deductions only in federally declared disaster areas. If you have personal casualty gains because your insurance proceeds exceed the tax basis of the damaged or destroyed property, you can deduct personal casualty losses that aren’t due to a federally declared […]

By Linkenheimer LLP|2020-09-03T20:04:04+00:00April 23rd, 2019|business, deduction, deductions, disaster, New Tax Laws|0 Comments

Deducting Business Meal Expenses Under Today’s Tax Rules

In the course of operating your business, you probably spend time and money “wining and dining” current or potential customers, vendors and employees. What can you deduct on your tax return for these expenses? The rules changed under the Tax Cuts and Jobs Act (TCJA), but you can still claim some valuable write-offs.

No more entertainment deductions

One of the biggest changes is that you can no longer deduct most business-related entertainment expenses. Beginning in 2018, the TCJA disallows deductions for entertainment expenses, including those for sports events, theater productions, golf outings and fishing trips.

Meal deductions still allowed

You can still deduct 50% of the cost of food and beverages for meals conducted with business associates. However, you need to follow three basic rules in order to prove that your expenses are business related:

The expenses must be “ordinary and necessary” in carrying on your business. This means your food and beverage costs are customary and appropriate. They shouldn’t be lavish or extravagant.
The expenses must be directly related or associated with your business. This means that you expect to receive a concrete business benefit from them. The principal purpose for the meal must be business. […]

By Linkenheimer LLP|2020-09-03T20:04:05+00:00April 19th, 2019|business, deduction, deductions, expensing, irs, New Tax Laws|0 Comments

Understanding How Taxes Factor into an M&A Transaction

Merger and acquisition activity has been brisk in recent years. If your business is considering merging with or acquiring another business, it’s important to understand how the transaction will be taxed under current law.

Stocks vs. assets

From a tax standpoint, a transaction can basically be structured in two ways:

1. Stock (or ownership interest). A buyer can directly purchase a seller’s ownership interest if the target business is operated as a C or S corporation, a partnership, or a limited liability company (LLC) that’s treated as a partnership for tax purposes.

The now-permanent 21% corporate federal income tax rate under the Tax Cuts and Jobs Act (TCJA) makes buying the stock of a C corporation somewhat more attractive. Reasons: The corporation will pay less tax and generate more after-tax income. Plus, any built-in gains from appreciated corporate assets will be taxed at a lower […]

By Linkenheimer LLP|2020-09-03T20:04:09+00:00April 2nd, 2019|business, New Tax Laws, tax|0 Comments

Stretch Your College Student’s Spending Money with the Dependent Tax Credit

If you’re the parent of a child who is age 17 to 23, and you pay all (or most) of his or her expenses, you may be surprised to learn you’re not eligible for the child tax credit. But there’s a dependent tax credit that may be available to you. It’s not as valuable as the child tax credit, but when you’re saving for college or paying tuition, every dollar counts!

Background of the credits

The Tax Cuts and Jobs Act (TCJA) increased the child credit to $2,000 per qualifying child under the age of 17. The law also substantially increased the phaseout income thresholds for the credit so more people qualify for it. Unfortunately, the TCJA eliminated dependency exemptions for older children for 2018 through 2025. But the TCJA established a new $500 tax credit for dependents who aren’t under-age-17 children who qualify for the child tax credit. However, these individuals must pass certain tests to be classified as dependents.

A qualifying dependent for purposes of the $500 credit includes:

A dependent child who lives with you for over half the year and is over age 16 and up to age 23 if he […]

By Linkenheimer LLP|2020-09-03T20:04:11+00:00March 19th, 2019|child, education credit, New Tax Laws, tax credit|0 Comments