Tag Archives: tax planning

Tax Planning Advice for Major Life Changes


We can never predict what life has for us. 

There may be significant milestones and changes that can impact your finances. It may be marriage, a baby, buying a home, changing careers, or nearing retirement. These life changes all have their unique tax considerations. Proper tax planning during these times can help you navigate these transitions more smoothly and maximize your financial well-being. 

Here are some tax planning ideas for major life changes:

  1. Marriage. Marriage changes your tax situation. If you’re recently married or about to get married, consider the following:
    • Update Your Filing Status: Choose between filing jointly or separately. Filing jointly often provides more tax benefits due to lower tax rates and increased deductions. Calculate both scenarios to determine which is more advantageous.
    • Review Withholding: Update your W-4 with your employer to reflect your new marital status. This will ensure that your withholding accurately reflects your combined income and tax situation.
  2. Baby: The new member of your family is a life-altering event that also impacts your taxes:
    • Claiming Dependents: You can claim a child as a dependent, which could lead to valuable tax credits such as the Child Tax Credit and the Earned Income Tax Credit.
    • Childcare Expenses: If you’re returning to work and paying for childcare, you might be eligible for the Child and Dependent Care Credit, which can help offset some of these costs.
  3. Purchasing a Home: Becoming a homeowner has tax implications:
    • Mortgage Interest Deduction: Depending on your income & deductions you may be able to deduct mortgage interest paid on your primary and, in some cases, secondary residence, which can provide substantial tax savings.
    • Property Taxes: Property taxes are often deductible, so keep track of these payments for tax purposes.
    • Home Office Deduction: If you use a portion of your home exclusively for business purposes (not applicable if you are compensated by W2), you might be eligible for a home office deduction.
  4. Changing Careers: Transitioning to a new job or career can lead to changes in your tax situation:
    • Job Search Expenses: Some job-related expenses, such as resume preparation and travel for interviews, might be deductible if they exceed a certain threshold.
  5. Approaching Retirement: As you near retirement, strategic tax planning can help you make the most of your savings:
    • Social Security Timing: The timing of when you start receiving Social Security benefits can impact the taxes you owe on those benefits. Be aware of the potential tax consequences.
    • Required Minimum Distributions (RMDs) for 2023: Once you reach the age of 73 (or 70½ if you were born before July 1, 1949), you’ll need to start taking RMDs from your retirement accounts. Plan for the tax implications of these distributions.
  6. Estate Planning: This is a critical aspect of your financial journey that affects your loved ones:
    • Gift and Estate Taxes: If you plan to gift substantial assets or have a sizable estate, understanding the gift and estate tax thresholds and exemptions is important for tax-efficient transfers.
  7. Divorce: Divorce can have significant financial and tax ramifications:
    • Alimony and Child Support: Understand the tax treatment of alimony (taxable to the recipient, deductible by the payer if the divorce was finalized by the end of 2018) and child support (non-taxable).
    • Property Division: The division of property during divorce can have tax consequences. Consult with professionals to ensure equitable and tax-efficient outcomes.

You should seek advice from a tax professional or financial advisor. They can guide you based on your specific circumstances and help you make informed decisions that align with your long-term financial goals. Tax laws can change, so staying informed and proactive is key to optimizing your financial situation during every stage of your life. 

A.K. Burton, PC, has experienced accountants who can help you do your tax and estate planning for now and the future changes in your life. Call us at (301) 365-1974 for a consultation.

We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** For more information on marriage and taxes, visit the Tax Policy Center website.  

 

 

Five Tax-Planning Strategies to Try Before 12/31/2020

It’s November. What comes to mind when you hear November? Holidays and turkey time? At my work, we are thinking about something a little different…tax planning! The tax year 2020 is drawing to a close. That means there’s still a good month left for tax planning. If you own a business, you still have time to make some crucial, time-saving, and money-saving tax planning decisions. The tax year 2020 has held some significant challenges navigating the COVID-19 pandemic. Tax planning is important; especially if your business has been significantly impacted by the pandemic. Contact your tax preparer to discuss some tax planning strategies. Next thing you know, the first quarter 2021 will be happening and it will be time to put that planning to good use.

Take the time to meet with your CPA and go over your books. Here are some tax-planning ideas to get the ball rolling:

  1. Claim quick disaster loss refunds. Businesses can claim specific losses attributable to a disaster on a prior-year tax return. This is meant to provide quicker refunds. The Trump COVID-19 disaster declaration designated all 50 states, the District of Columbia, and five territories as disaster areas. Almost every U.S. business is in the covered disaster area thus making it eligible for refunds, depending on the losses. A business may claim a COVID-19 related disaster loss occurring in 2020 on a 2019 amended return for a quicker refund. It may affect losses coming from many different circumstances, such as loss of inventory or supplies or office, plant, or store closures. The loss must actually be attributable to or caused by COVID-19.
  2. Payroll tax deductions. The CARES Act lets employers defer paying their 6.2% share of Social Security taxes for the rest of 2020. Half of it is due by Dec. 31, 2021. The second half is due by Dec. 31, 2022. Payroll taxes cannot be deducted until their share is paid. Some taxpayers may pay the taxes as late as 8½ months into 2021 but still, claim a deduction for 2020.
  3. Use above-the-line charitable deduction. In the past, there was no tax benefit for giving to charity unless you itemized deductions. The CARES Act, however, created an above-the-line deduction of up to $300 for cash contributions from taxpayers who don’t itemize. In order to take advantage of this provision, donate by 12/31/2020. 
  4. Make up a tax shortfall with increased withholding. COVID-19 caused cash-flow issues for many businesses this year. Your withholding and estimated taxes should align with what you actually expect to pay while you correct the cash flow issue. If you are in danger of being penalized for underpaying taxes, make it up through increased withholding on your salary or bonuses.
  5. Use low-interest rates and generous exemptions. Interest rates this year are historically low. Plus, lifetime gift and estate tax exemptions can still be utilized. COVID-19 is depressing many asset values but you can still use estate-planning strategies. The present gift and estate tax exemptions are scheduled to expire in a few years. 
  6. Claim AMT refunds. The Tax Cuts and Jobs Act (TCJA) repealed the corporate alternative minimum tax (AMT). Now, corporations may claim all their unused AMT credits in the tax years beginning in 2018, 2019, 2020, and 2021. The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows corporations to claim credits in either 2018 or 2019. Companies have several options to file for quick refunds. They can file a tentative refund claim on Form 1139. It must be filed on 12/31/2020 to claim an AMT credit.

There are a number of tax planning strategies that may be in the best interest of your business. In order to customize your tax planning strategy, we need to meet with you, analyze the data, and discuss. The tax planning process takes some time, so don’t wait until the last minute. Contact us today and consult one of our experienced tax advisors. 

A.K. Burton, PC, can assist small business clients with their taxes. We are familiar with the CARES Act and TCJA and can advise our clients on being proactive in their tax planning by the end of the year. Call us at (301) 365-1974 for a consultation. Our office is open! We serve Bethesda, Rockville, and Montgomery County. MD area.

*** You can find more information about TCJA at the IRS website

Tax Planning During the COVID-19 Crisis

It’s the middle of May 2020, when spring is ending and summer is just around the corner. We’re looking forward to Memorial Day and the warmer weather. Unlike last year, we are in the middle of the COVID-19/Coronavirus Crisis in the DMV/Beltway area. The pandemic has put a kink in our summer plans as well as our tax plans. 

Our new normal is where some businesses are closed. Quarantines are still in place. The streets and parks are quiet. Life, as we know it, has been put on hold until the government issues new guidelines. It is only speculation as to when life will resume with the same kind of normalcy before the pandemic gripped our country. How can we possibly plan ahead in an uncertain world, let alone a tax plan?

At A.K. Burton PC, we are still open for business. We are available by phone and execute our work virtually and remotely. We are working to help our clients during this unprecedented global pandemic. Our clients are our first priority. Even though the pandemic has turned our lives upside-down here’s a friendly reminder of some tax planning strategies:  

  1. Health Insurance: If you’ve had a major change in income for 2020, and you have your health insurance coverage through the marketplace; update your income information. It may lower your monthly premiums. If you have had a major life change such as losing your job, you may qualify for a “Special Enrollment Period” and be able to enroll in health insurance coverage through the marketplace at healthcare.gov. 
  2. Home office deduction: Since the COVID-19 epidemic, you may have needed to work from home. Depending on the method your income is earned you may or may not qualify for business use of home deduction on your 2020 tax return. If you do qualify for a deduction, your office must be the square footage in your home that is EXCLUSIVELY used for business. It can not be the sofa where you watch TV or your bed where you sleep at night. Keep track of expenses for your home including electricity, WiFi, water, and phone expenses. Keep track of any office supplies such as printer ink or computer paper. 
  3. Capital gains/ losses: Keep records of your trades and holdings in stocks, cryptocurrencies, and commodities. Save all of your trade data so you can report all reportable transactions accurately. 
  4. Online software for business: In order to do business from home, you may have had to purchase or rent certain software. This may include subscriptions to Zoom or other pertinent software programs. Keep accurate records of these receipts. 

A.K. Burton, PC, has experienced tax advisors who can assist you in this unprecedented time. We are here for our clients working to file their tax returns. Call us at (301) 365-1974 for a phone consultation. We serve the Bethesda, Rockville, and Montgomery County. MD area.