If you’re a collector, donating from your collection instead of your bank account or investment portfolio can be tax-smart. When you donate appreciated property rather than selling it, you avoid the capital gains tax you would have incurred on a sale. And long-term gains on collectibles are subject to a higher maximum rate (28%) than long-term gains on most long-term property (15% or 20%, depending on your tax bracket) — so you can save even more taxes.
But choose the charity wisely. For you to receive a deduction equal to fair market value rather than your basis in the collectible, the item must be consistent with the charity’s purpose, such as an antique to a historical society.
Properly substantiating the donation is also critical, and this may include an appraisal. If you donate works of art with a collective value of $5,000 or more, you’ll need a qualified appraisal, and if the collective value is $20,000 or more, a copy of the appraisal must be attached to your tax return. If an individual item is valued at $20,000 or more, you may also be required to provide a photograph of that item.
If you’re considering a donation of artwork or other collectibles, contact us for help ensuring you can maximize your tax deduction.
Teenagers’ retirement may seem too far off to warrant saving now, but IRAs can be perfect for teens precisely because they’ll likely have many years to let their accounts grow tax-deferred or tax-free.
By distributing profits in the form of dividends rather than salary, an S corporation and its owners can avoid payroll taxes on these amounts. Because of the additional 0.9% Medicare tax on wages in excess of $200,000 ($250,000 for joint filers and $125,000 for married filing separately), the potential tax savings may be even greater than it once would have been. (S corporation dividends paid to shareholder-employees generally won’t be subject to the 3.8% net investment income tax.)
If you usually receive a large federal income tax refund, you’re essentially making an interest-free loan to the IRS. Rather than wait until you file your 2015 tax return in 2016, why not begin enjoying your “refund” now by reducing your withholdings or estimated tax payments for the remainder of 2015?
On June 26, the U.S. Supreme Court ruled that same-sex couples have a constitutional right to marry, making same-sex marriage legal in all 50 states. For federal tax purposes, same-sex married couples were already considered married, under the Court’s 2013 decision in United States v. Windsor and subsequent IRS guidance — even if their state of residence didn’t recognize their marriage.
With the U.S. Supreme Court’s June 25 decision upholding the Affordable Care Act (ACA) yet again, employers subject to the act’s information reporting provision can no longer afford to put off planning in the hope that the requirements might go away.
If you donate your vehicle, the value of your deduction can vary greatly depending on what the charity does with it. You can deduct the vehicle’s fair market value (FMV) if the charity:
Incentive stock options allow you to buy company stock in the future at a fixed price equal to or greater than the stock’s fair market value on the grant date. If the stock appreciates, you can buy shares at a price below what they’re then trading for.
Planning
Investment interest — interest on debt used to buy assets held for investment, such as margin debt used to buy securities — generally is deductible for both regular tax and alternative minimum tax purposes. But special rules apply that can make the deduction less beneficial than you might think.
