With only a few days remaining in calendar year 2019, for those packing up their cars full of used clothing and household items to take to the local charitable thrift store for a last minute, year-end, itemized charitable contribution tax deduction, a quick review of the charitable contribution deduction rules is in order:
Shoppers may have experienced a surprising addition to their final bill on Cyber Monday: a sales tax. Due to the Supreme Court's recent decision in South Dakota v. Wayfair, states can now require a sales tax on online transactions by buyers within their state. If the state applies a sales tax in a reasonable manner, the tax would likely withstand a legal challenge.
The exact requirements are not yet known, but it is likely a state that applies a tax in the same manner as South Dakota would survive a legal challenge. South Dakota's approach required a tax on retailers that exceeded a set threshold in sales or number of transactions within the state.
Yes, the standardized deduction has changed. The Tax Cuts and Jobs Act (TCJA) has basically doubled the standard deduction — currently set at $12,000 for individuals and $24,000 for married couples filing a joint return. This increase makes it much more favorable for taxpayers to file their tax returns using the standardized deduction as opposed to itemized deductions.
In some cases, taxpayers could still make the most of their charitable giving arrangements by “bunching” their donations.
The Internal Revenue Service (IRS) taxes just about every financial transaction. There are some exceptions, often justified by the fact that encouraging taxpayers to partake in the excepted activity is in the country’s best interest. One example: saving for retirement.
In some cases, the government will make changes to these exceptions. The IRS recently announced a set of changes that result in the increase of contribution limits to certain retirement accounts in 2019.
The laws governing state taxation of online business transactions is in the process of a major evolution. The change began with a holding from the Supreme Court of the United States (SCOTUS) in June of 2018.
What led to the change? The country began to change state taxation laws in South Dakota v. Wayfair. This case addressed the legal issue of when a state can tax a business for an online transaction.
Businesses can use IRS tax code Section 179 to deduct the purchase price of certain equipment or software for the current tax year. There are some limitations to this deduction.
What are some of the limitations to Section 179 deductions? First, there is a cap. The Tax Cuts and Jobs Act (TCJA) increased this cap from $500,000 to $1,000,000.
A 529 plan is a savings account that is set up to offer tax-advantages for those who invest in their children's higher educational expenses. These plans have evolved over the years, most recently with the passage of the Tax Cuts and Jobs Act (TCJA) at the close of 2017.
One big change that came with the tax reform of the TCJA: 529 plans extend beyond college savings.
How did tax reform change 529 plans? Due to the passage of the TCJA, 529 plans were no longer limited to college expenses. The TCJA expanded these plans to apply to qualifying expenses incurred in private, public and religious schools that range from kindergarten to 12th grade. In addition, students refunded tuition (for example, due to dropping a class) can avoid income taxation on the refunded amount if the refund is recontributed to the 529 account within 60 days of receipt. Future Treasury Regulations will also clarify that the beneficiary's maximum lifetime contribution limit is not impacted by recontributed refunds.
Online retailers are a major part of our current economy. Everything from small, local businesses to major, global corporations sell their goods online. State governments have struggled to evolve with our shopping habits. One particular area of struggle: the application of a state sales tax in e commerce.
The Supreme Court of the United States (SCOTUS) provided some guidance in 1992 with its ruling in Quill v. North Dakota. In Quill, SCOTUS ruled a state could only require remote retailers to pay a state sales tax if the retailer had a physical presence within the state. It went on to provide examples of physical presence which included the use of a warehouse, brick and mortar store or headquarters within the state.
The United States government requires American taxpayers report foreign assets to the Internal Revenue Service (IRS). A failure to meet this obligation can result in hefty monetary penalties and fines as well as potential imprisonment. The severity of these penalties can increase as time passes without compliance. As such, any taxpayers that have yet to come into compliance are wise to do so promptly.
Another reason for prompt compliance: one of the programs that reduces the penalties is about to sunset. The IRS recently announced the end of the Offshore Voluntary Disclosure Program (OVDP). This agency has scheduled this program to close on September 28, 2018.
The Tax Cuts and Jobs Act (TCJA) roughly doubles the transfer tax exemption from $5.6 million per individual to $11.18 million per individual or $22.36 million per married couple.
The only catch: the exemption amount has an expiration date. The law has scheduled the exemption extension to sunset in 2025. Unless Congress acts to further extend the transfer tax exemption amount, it will return to the previous $5.6 million rate in 2026.
The wealthy can use estate planning tools to make the most of this increased exemption amount, effectively safeguarding the extended amount even if it does sunset as scheduled. One legal tool that can help achieve this goal: the SLAT.