February 04, 2019 | BY admin
As you likely know by now, the Tax Cuts and Jobs Act (TCJA) reduced or eliminated many deductions for individuals. One itemized deduction the TCJA kept intact is for investment interest expense. This is interest on debt used to buy assets held for investment, such as margin debt used to buy securities. But if you have investment interest expense, you can’t count on benefiting from the deduction.
There are a few hurdles you must pass to benefit from the investment interest deduction even if you have investment interest expense:
1. You must itemize deductions. In the past this might not have been a hurdle, because you may have typically had enough itemized deductions to easily exceed the standard deduction. But the TCJA nearly doubled the standard deduction, to $24,000 (married couples filing jointly), $18,000 (heads of households) and $12,000 (singles and married couples filing separately) for 2018. Plus, some of your other itemized deductions, such as your state and local tax deduction, might be smaller on your 2018 return because of TCJA changes. So you might not have enough itemized deductions to exceed your standard deduction and benefit from itemizing.
2. You can’t have incurred the interest to produce tax-exempt income. For example, if you borrow money to invest in municipal bonds, which are exempt from federal income tax, you can’t deduct the interest.
3. You must have sufficient “net investment income.” The investment interest deduction is limited to your net investment income. For the purposes of this deduction, net investment income generally includes taxable interest, nonqualified dividends and net short-term capital gains, reduced by other investment expenses. In other words, long-term capital gains and qualified dividends aren’t included. However, any disallowed interest is carried forward. You can then deduct the disallowed interest in a later year if you have excess net investment income.
You may elect to treat net long-term capital gains or qualified dividends as investment income in order to deduct more of your investment interest. But if you do, that portion of the long-term capital gain or dividend will be taxed at ordinary-income rates.
Will interest expense save you tax?
As you can see, the answer to the question depends on multiple factors. We can review your situation and help you determine whether you can benefit from the investment interest expense deduction on your 2018 tax return.
individual tax - tax reform
June 13, 2018 | BY admin
The massive changes the Tax Cuts and Jobs Act (TCJA) made to income taxes have garnered the most attention. But the new law also made major changes to gift and estate taxes. While the TCJA didn’t repeal these taxes, it did significantly reduce the number of taxpayers who’ll be subject to them, at least for the next several years. Nevertheless, factoring taxes into your estate planning is still important. (more…)
estate planning - tax - tax reform
June 06, 2018 | BY Esther Wolman
The Tax Cuts & Jobs Act (TCJA) involves several changes to the rules governing choice of accounting method for businesses.
Specifically the gross receipts threshold for Cash Basis Accounting has been raised. The details and qualifications for this law change are outlined below. (more…)
cash basis accounting - tax - tax reform
May 31, 2018 | BY Samuel Goldschmidt
Prior to the Tax Cuts and Jobs Act (TCJA), income earned by U.S. shareholders of a foreign corporation has generally not been subject to U.S. tax until the income is distributed as a dividend to U.S. shareholders.
The TCJA however, has introduced two significant changes to the taxation of income earned by a foreign corporation owned by U.S. shareholders.
foreign income - income tax - tax - tax reform
May 07, 2018 | BY admin
Now that small businesses and their owners have filed their 2017 income tax returns (or filed for an extension), it’s a good time to review some of the provisions of the Tax Cuts and Jobs Act (TCJA) that may significantly impact their taxes for 2018 and beyond. Generally, the changes apply to tax years beginning after December 31, 2017, and are permanent, unless otherwise noted. (more…)
small business - tax reform - tax return