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Make Sure the IRS Won’t Consider Your Business To Be a “Hobby”

Make Sure the IRS Won’t Consider Your Business To Be a “Hobby”

If you run a business “on the side” and derive most of your income from another source (another business you own, employment or investments), you may face a peculiar risk: Under certain circumstances, this on-the-side business might not be a business in the eyes of the IRS. It may be considered a hobby. The hobby loss rules Generally, a taxpayer can deduct losses from profit-motivated activities, either from other income in the same tax year or by carrying the loss back to a previous tax year or forward to a future tax year. But, to ensure these pursuits are really businesses — and not mere...

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The Section 1031 Exchange: Why It’s Such a Great Tax Planning Tool

The Section 1031 Exchange: Why It’s Such a Great Tax Planning Tool

If you’re like many business owners, you might also own highly appreciated business or investment real estate. Fortunately, there’s an effective tax planning strategy at your disposal: the Section 1031 “like kind” exchange. It can help you defer capital gains tax on appreciated property indefinitely. How it works Section 1031 of the Internal Revenue Code allows you to defer gains on real or personal property used in a business or held for investment if, instead of selling it, you exchange it solely for property of a “like kind.” In fact, these arrangements are often referred to as “like-kind...

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2016 IRA Contributions — It’s Not Too Late!

2016 IRA Contributions — It’s Not Too Late!

There’s still time for you to make 2016 contributions to your IRA. The deadline for such contributions is April 18, 2017. If the contribution is deductible, it will lower your 2016 tax bill. But even if it isn’t, making a 2016 contribution is probably a good idea. Benefits beyond a deduction Tax-advantaged retirement plans like IRAs allow your money to grow tax-deferred — or, in the case of Roth accounts, tax-free. But annual contributions are limited by tax law, and any unused limit can’t be carried forward to make larger contributions in future years. This means that, once the contribution...

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When an Elderly Parent Might Qualify as Your Dependent

When an Elderly Parent Might Qualify as Your Dependent

It’s not uncommon for adult children to help support their aging parents. If you’re in this position, you might qualify for the adult-dependent exemption. It allows eligible taxpayers to deduct up to $4,050 for each adult dependent claimed on their 2016 tax return. Basic qualifications In order for you to qualify for the adult-dependent exemption, in most cases your parent must have less gross income for the tax year than the exemption amount. (Exceptions may apply if your parent is permanently and totally disabled.) Generally Social Security is excluded, but payments from dividends,...

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Filing Deadline Rapidly Approaching for Flow-Through Entities

Filing Deadline Rapidly Approaching for Flow-Through Entities

The federal income tax filing deadline for calendar-year partnerships, C and S corporations and limited liability companies (LLCs) treated as partnerships or S corporations for tax purposes is March 15. Note: While this deadline is nothing new for S corporation returns, it’s earlier than previous years for partnership returns. In addition to providing continued funding for federal transportation projects, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 changed the due dates for several types of tax and information returns, including partnership income tax...

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When It Comes to Charitable Deductions, All Donations Aren’t Created Equal

When It Comes to Charitable Deductions, All Donations Aren’t Created Equal

As you file your 2016 income tax return and plan your charitable giving for 2017, it’s important to keep in mind the available deduction. It can vary significantly depending on a variety of factors. What you give Other than the actual amount you donate, one of the biggest factors that could affect your deduction is what you give: Cash. This includes not just actual cash but gifts made by check, credit card or payroll deduction. You may deduct 100%. Ordinary-income property. Examples include stocks and bonds held one year or less, inventory, and property subject to depreciation recapture. You...

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