The SECURE Act of 2019 is a broad bill with the purpose of increasing access to tax-advantaged retirement accounts in order to prevent retirees from outliving their assets. It mostly impacts those already in retirement or close to it.
1. RMD Relief: Previously, IRA and employer-sponsored retirement plan holders were required to start taking Required Minimum Distributions (RMDs) from age 70½ to age 72. This will give retirees more time to let their savings grow tax-free.
2. More Planning Opportunities for Roth IRAs: The change in the RMD age described above means account holders will have an extra two years to do a Roth IRA conversion. This can be important because unlike traditional IRAs, Roth IRAs are not subject to RMDs during the taxpayer’s lifetime.
3. More Chances to Save: Previously tax-deductible IRA contributions were forbidden after age 70½. The SECURE Act gets rid of this restriction, so if you are still earning money in your 70s and onward, you’ll have the opportunity to save into a deductible IRA.
4. Easier for Small Businesses to Establish Retirement Plans: The SECURE Act allows a greater number of small businesses to join up to give employees Multiple Employer Plans (or MEPs) starting in 2021. This eases the administrative burden and costs of offering retirement plans. The hope is that more small employers will begin to offer plans.
5. Guaranteed Income for Life: Employers will now be able to allow employees to change their retirement plan savings into annuities without the fear of a lawsuit being filed against them – in the case the insurer they pick fails to pay the annuity payments.
6. Removes “Stretch” Provisions: Prior to the SECURE Act, traditional IRA beneficiaries typically had to take RMDs over their own life expectancy, extending the tax benefits of the retirement account. Starting on Jan. 1, 2020, the SECURE Act changes this rule. Now, most beneficiaries only have 10 years to liquidate their entire inherited retirement account (with some exemptions, such as surviving spouses and minor children).
The SECURE Act of 2019
January 1, 2020 · Blog, Guest Post of the Month
⏱ 2 min read
The SECURE Act of 2019 is a broad bill with the purpose of increasing access to tax-advantaged retirement accounts in order to prevent retirees from outliving their assets. It mostly impacts those already in retirement or close to it.
1. RMD Relief: Previously, IRA and employer-sponsored retirement plan holders were required to start taking Required Minimum Distributions (RMDs) from age 70½ to age 72. This will give retirees more time to let their savings grow tax-free.
2. More Planning Opportunities for Roth IRAs: The change in the RMD age described above means account holders will have an extra two years to do a Roth IRA conversion. This can be important because unlike traditional IRAs, Roth IRAs are not subject to RMDs during the taxpayer’s lifetime.
3. More Chances to Save: Previously tax-deductible IRA contributions were forbidden after age 70½. The SECURE Act gets rid of this restriction, so if you are still earning money in your 70s and onward, you’ll have the opportunity to save into a deductible IRA.
4. Easier for Small Businesses to Establish Retirement Plans: The SECURE Act allows a greater number of small businesses to join up to give employees Multiple Employer Plans (or MEPs) starting in 2021. This eases the administrative burden and costs of offering retirement plans. The hope is that more small employers will begin to offer plans.
5. Guaranteed Income for Life: Employers will now be able to allow employees to change their retirement plan savings into annuities without the fear of a lawsuit being filed against them – in the case the insurer they pick fails to pay the annuity payments.
6. Removes “Stretch” Provisions: Prior to the SECURE Act, traditional IRA beneficiaries typically had to take RMDs over their own life expectancy, extending the tax benefits of the retirement account. Starting on Jan. 1, 2020, the SECURE Act changes this rule. Now, most beneficiaries only have 10 years to liquidate their entire inherited retirement account (with some exemptions, such as surviving spouses and minor children).
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Believe it or not, it’s 2020. You’re not just starting a new year, you’re entering a new decade. With this in mind, you might want to make some resolutions that focus on your finances. According to Psychology Today, 80 percent of resolutions fail by February. If you’re thinking about dieting or eating better, this isn’t very encouraging. However, when it comes to your money, there are some changes you can implement now that will have staying power and won’t be forgotten by spring.
Review Your Credit Report
This is important for your financial future in many ways, particularly if you want to buy a house or a car (and that’s just for starters). If you need to make some repairs to your score, the new year is the best time to do this. Better still, you’re entitled to three free reports each year. Check it out. See how you’re doing. You’ve got nothing to lose and everything to gain.
Get Out of Debt
This might be easier said than done, but it’s absolutely possible. One very helpful tool is Unbury.Me. It’s free and easy to use. Just create an account and map out a payment plan that works for you. If you want to wipe away your debt quickly, there’s the avalanche method, which attacks the highest interest rate debts first, then moves to the second highest and so on. But this isn’t the only solution. There’s another tool that actually uses your purchases to help you pay down debt: Qoins. Here’s how it works. You round your purchases to the nearest dollar, then apply the cash to your debt, i.e. student loans or credit cards. So, in essence, you can go on living your life while shrinking your debt.
Evaluate Your Insurance and Disability Insurance Needs
As you age, your insurance needs change. Think about how much protection you really need. For example, would you be better served by term or permanent life insurance? What about disability insurance? For the latter, make sure you have enough coverage. Life happens. It’s always best to be prepared.
Refresh Your Retirement Savings
If you work for a company that offers 401(k), 403(k) or 457 plans, consider asking your employer to withhold enough through salary deferrals to make sure you reach the maximum limit each year. If you’re over 50, you can raise the amount to make catch-up contributions. If you’re self-employed, you can contribute to a SEP IRA, profit-sharing plan or independent 401(k) plan. Making retirement deductions from your paychecks, especially when they’re maxed out, might take a bit of getting used to. But once you’ve retired, you’ll be very glad you had the foresight to act now.
Truth is that the above resolutions are just the tip of the moneyberg. You can go deeper into each area. If you want further assistance, consult a financial planner or your accountant. But the biggest takeaway from all these suggestions is simple: begin now, or as soon as you can. When you’re making the most of your money today, you’re working toward a more secure tomorrow.
4 Financial New Years Resolutions You Can Actually Keep
January 1, 2020 · Blog, Tip of the Month
⏱ 4 min read
Believe it or not, it’s 2020. You’re not just starting a new year, you’re entering a new decade. With this in mind, you might want to make some resolutions that focus on your finances. According to Psychology Today, 80 percent of resolutions fail by February. If you’re thinking about dieting or eating better, this isn’t very encouraging. However, when it comes to your money, there are some changes you can implement now that will have staying power and won’t be forgotten by spring.
Review Your Credit Report
This is important for your financial future in many ways, particularly if you want to buy a house or a car (and that’s just for starters). If you need to make some repairs to your score, the new year is the best time to do this. Better still, you’re entitled to three free reports each year. Check it out. See how you’re doing. You’ve got nothing to lose and everything to gain.
Get Out of Debt
This might be easier said than done, but it’s absolutely possible. One very helpful tool is Unbury.Me. It’s free and easy to use. Just create an account and map out a payment plan that works for you. If you want to wipe away your debt quickly, there’s the avalanche method, which attacks the highest interest rate debts first, then moves to the second highest and so on. But this isn’t the only solution. There’s another tool that actually uses your purchases to help you pay down debt: Qoins. Here’s how it works. You round your purchases to the nearest dollar, then apply the cash to your debt, i.e. student loans or credit cards. So, in essence, you can go on living your life while shrinking your debt.
Evaluate Your Insurance and Disability Insurance Needs
As you age, your insurance needs change. Think about how much protection you really need. For example, would you be better served by term or permanent life insurance? What about disability insurance? For the latter, make sure you have enough coverage. Life happens. It’s always best to be prepared.
Refresh Your Retirement Savings
If you work for a company that offers 401(k), 403(k) or 457 plans, consider asking your employer to withhold enough through salary deferrals to make sure you reach the maximum limit each year. If you’re over 50, you can raise the amount to make catch-up contributions. If you’re self-employed, you can contribute to a SEP IRA, profit-sharing plan or independent 401(k) plan. Making retirement deductions from your paychecks, especially when they’re maxed out, might take a bit of getting used to. But once you’ve retired, you’ll be very glad you had the foresight to act now.
Truth is that the above resolutions are just the tip of the moneyberg. You can go deeper into each area. If you want further assistance, consult a financial planner or your accountant. But the biggest takeaway from all these suggestions is simple: begin now, or as soon as you can. When you’re making the most of your money today, you’re working toward a more secure tomorrow.
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
The economic indicator known as Gross Domestic Product (GDP) represents the dollar value of all purchased goods and services over the course of one year. It is comprised of purchases from all private and public consumption, including for profit, nonprofit and government sectors.
There are four components that are added to calculate the GDP:
Consumer spending
Government spending
Investment spending (this includes business, inventory, residential construction and public investment), Net exports, meaning the value of goods exported minus the value of goods imported
The government calculates and publishes the GDP rate on a quarterly basis and for the entire year.
What Affects GDP?
There are different ways GDP is measured. For example, nominal GDP refers to a straight calculation of raw data, while real GDP adjusts the calculation to include the impact of inflation.
When inflation increases, the GDP tends to rise; when prices drop, so does the GDP. Be aware that this adjustment can happen even when there is no change in the quantity of goods and services produced in the United States during that time frame.
A key component of the GDP calculation is net exports. This number rises when the country sells more goods and services to foreign countries than it buys from them. A trade surplus means the United States sells more than it purchases, which is a strong contributor to GDP. When the United States buys more foreign goods than it sells, this creates a trade deficit, which is a negative weight in the GDP calculation.
GDP also reflects demand. The dollar output of certain sectors and industries rises and falls based on the popularity of their products and services. For example, when a new product is well received, then those sales increase that sector’s contribution to the GDP. This is a helpful measure because it enables companies to make better research and development decisions based on recent success. The same is true when a new product, or even an upgrade to a new product, does not increase sales.
What Does GDP Indicate?
The GDP is the most common, broad-based measure used to monitor the country’s economic progress. When it is on the rise, the economy is considered to be growing. When the GDP rate drops – even if it remains in positive territory – the economy is viewed as contracting. If it continues to slip quarter after quarter, it is an indicator that the economy might be in trouble and the Federal Reserve or Congress could consider altering monetary (interest rates) or fiscal (taxes and government spending) policy to inject cash into the nation’s financial system.
Technically, economists define a recession as a prolonged period of economic decline, often precipitated by two consecutive quarters of negative GDP growth.
This economic yardstick also is used to indicate a country’s general standard of living. The better a country is able to produce the goods and services that its residents and businesses use, the more that capital is infused back into the country. Therefore, higher GDP levels indicate a more prosperous country and relatively higher standard of living among its residents.
The GDP doesn’t just gauge domestic economic health, it serves as a comparison measure to other countries. This is particularly important during periods of growth and decline, when the United States can track how well it is responding to global economic factors relative to other countries.
Current Trendline
According to the Bureau of Economic Analysis, first quarter real GDP closed at 3.1 percent. In the second quarter, real GDP fell to 2.0 percent. The advanced assessment for the third quarter of 2019 is 1.9 percent.
Gross Domestic Product: A Primer
December 1, 2019 · Blog, Financial Planning
⏱ 4 min read
The economic indicator known as Gross Domestic Product (GDP) represents the dollar value of all purchased goods and services over the course of one year. It is comprised of purchases from all private and public consumption, including for profit, nonprofit and government sectors.
There are four components that are added to calculate the GDP:
Consumer spending
Government spending
Investment spending (this includes business, inventory, residential construction and public investment), Net exports, meaning the value of goods exported minus the value of goods imported
The government calculates and publishes the GDP rate on a quarterly basis and for the entire year.
What Affects GDP?
There are different ways GDP is measured. For example, nominal GDP refers to a straight calculation of raw data, while real GDP adjusts the calculation to include the impact of inflation.
When inflation increases, the GDP tends to rise; when prices drop, so does the GDP. Be aware that this adjustment can happen even when there is no change in the quantity of goods and services produced in the United States during that time frame.
A key component of the GDP calculation is net exports. This number rises when the country sells more goods and services to foreign countries than it buys from them. A trade surplus means the United States sells more than it purchases, which is a strong contributor to GDP. When the United States buys more foreign goods than it sells, this creates a trade deficit, which is a negative weight in the GDP calculation.
GDP also reflects demand. The dollar output of certain sectors and industries rises and falls based on the popularity of their products and services. For example, when a new product is well received, then those sales increase that sector’s contribution to the GDP. This is a helpful measure because it enables companies to make better research and development decisions based on recent success. The same is true when a new product, or even an upgrade to a new product, does not increase sales.
What Does GDP Indicate?
The GDP is the most common, broad-based measure used to monitor the country’s economic progress. When it is on the rise, the economy is considered to be growing. When the GDP rate drops – even if it remains in positive territory – the economy is viewed as contracting. If it continues to slip quarter after quarter, it is an indicator that the economy might be in trouble and the Federal Reserve or Congress could consider altering monetary (interest rates) or fiscal (taxes and government spending) policy to inject cash into the nation’s financial system.
Technically, economists define a recession as a prolonged period of economic decline, often precipitated by two consecutive quarters of negative GDP growth.
This economic yardstick also is used to indicate a country’s general standard of living. The better a country is able to produce the goods and services that its residents and businesses use, the more that capital is infused back into the country. Therefore, higher GDP levels indicate a more prosperous country and relatively higher standard of living among its residents.
The GDP doesn’t just gauge domestic economic health, it serves as a comparison measure to other countries. This is particularly important during periods of growth and decline, when the United States can track how well it is responding to global economic factors relative to other countries.
Current Trendline
According to the Bureau of Economic Analysis, first quarter real GDP closed at 3.1 percent. In the second quarter, real GDP fell to 2.0 percent. The advanced assessment for the third quarter of 2019 is 1.9 percent.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Eric Schmidt, former Google CEO, made a prediction in September 2018 that the internet will split in two – one part being led by China and the other by the United States. The reasoning behind this involves China’s active monitoring of all internet activities, as well as technological products and services from the country. Other reasons include a different leadership regime, controls and censorship.
Although it’s just speculation, the splinternet phenomenon has been around since the 1990s. Also known as cyber-balkanization, the concept is slowly taking root as governments seek to fence off their internet to create national internets.
How Realistic is Splinternet?
The United States has maintained dominance over the internet since its inception and going public. But in the modern digital landscape, rules and regulations are expected to curve the global internet into smaller networks. The idea is being driven by nationalism as well as concerns surrounding digital colonization and privacy issues.
China is one country known to be taking steps to compartmentalize the internet through its Great Firewall. Other countries that have taken steps to control domestic access to the internet include Russia and Iran. Europe is also taking steps toward reducing U.S. dominance by increasing regulations that require data localization. They have facilitates this with the 2018 introduction of General Data Protection Regulation (GDPR).
In the United States, there is a drive to increase internet fragmentation to reduce the domination of large companies. This is because of the need to increase personal data protection and reduce data control by large companies. With the world becoming more global, we continue to see cases of large companies like Facebook or Apple having more influence as well as centralized power.
Though a small fraction of the internet interactions, this provides a good example of the splintering. With such fragmentation of the internet increasing, it’s bound to have an effect on economic interests.
How a Split Internet Would Affect Businesses
Data has become a critical resource, from influencing purchasing decisions, behavior dynamics, health and other aspects. But with the changing internet landscape, businesses could be affected in one way or another. Businesses have had an easy time operating in a standardized web. But with the unity of the internet shattered, they would have to adjust their planning and metrics to fit into the new environment. For instance, due to China’s domestic internet control, it’s impossible for some companies in the United States to carry out business operations in China.
This situation presents a challenge for businesses – and especially those whose operations are purely internet based. Increased regulation means disruption of operations.
For small companies expanding to other countries, it would be difficult due to the overhead costs of compliance to various regional regulations. As a business, failing to comply with the laws of a different region would subject it to hefty fines.
Be Prepared
Whether this is going to be a reality or not, the fact is there are big changes happening on the internet. The days of an open internet are dwindling with different countries and companies erecting digital walls on the internet every other day.
Unless we have a new set of global rules that enhance openness and public interest, then businesses and consumers will have to navigate complex laws and regulations that will not only affect the economy, but also disrupt seamless communication.
Since data today plays a big role in the digital economy, businesses can’t afford to ignore the possibility of a splinternet. As a business owner, you need to stay steps ahead as it would be a challenge connecting with your customers when caught up in the changes.
Businesses need to know how to follow consumers to new environments – and this could mean a bigger budget is required for development and testing different markets. Given that technological changes happen gradually, it’s advisable to keep tabs on tech trends and adjust accordingly.
What is Splinternet and Why You Should Care
December 1, 2019 · Blog, What's New in Technology
⏱ 4 min read
Eric Schmidt, former Google CEO, made a prediction in September 2018 that the internet will split in two – one part being led by China and the other by the United States. The reasoning behind this involves China’s active monitoring of all internet activities, as well as technological products and services from the country. Other reasons include a different leadership regime, controls and censorship.
Although it’s just speculation, the splinternet phenomenon has been around since the 1990s. Also known as cyber-balkanization, the concept is slowly taking root as governments seek to fence off their internet to create national internets.
How Realistic is Splinternet?
The United States has maintained dominance over the internet since its inception and going public. But in the modern digital landscape, rules and regulations are expected to curve the global internet into smaller networks. The idea is being driven by nationalism as well as concerns surrounding digital colonization and privacy issues.
China is one country known to be taking steps to compartmentalize the internet through its Great Firewall. Other countries that have taken steps to control domestic access to the internet include Russia and Iran. Europe is also taking steps toward reducing U.S. dominance by increasing regulations that require data localization. They have facilitates this with the 2018 introduction of General Data Protection Regulation (GDPR).
In the United States, there is a drive to increase internet fragmentation to reduce the domination of large companies. This is because of the need to increase personal data protection and reduce data control by large companies. With the world becoming more global, we continue to see cases of large companies like Facebook or Apple having more influence as well as centralized power.
Though a small fraction of the internet interactions, this provides a good example of the splintering. With such fragmentation of the internet increasing, it’s bound to have an effect on economic interests.
How a Split Internet Would Affect Businesses
Data has become a critical resource, from influencing purchasing decisions, behavior dynamics, health and other aspects. But with the changing internet landscape, businesses could be affected in one way or another. Businesses have had an easy time operating in a standardized web. But with the unity of the internet shattered, they would have to adjust their planning and metrics to fit into the new environment. For instance, due to China’s domestic internet control, it’s impossible for some companies in the United States to carry out business operations in China.
This situation presents a challenge for businesses – and especially those whose operations are purely internet based. Increased regulation means disruption of operations.
For small companies expanding to other countries, it would be difficult due to the overhead costs of compliance to various regional regulations. As a business, failing to comply with the laws of a different region would subject it to hefty fines.
Be Prepared
Whether this is going to be a reality or not, the fact is there are big changes happening on the internet. The days of an open internet are dwindling with different countries and companies erecting digital walls on the internet every other day.
Unless we have a new set of global rules that enhance openness and public interest, then businesses and consumers will have to navigate complex laws and regulations that will not only affect the economy, but also disrupt seamless communication.
Since data today plays a big role in the digital economy, businesses can’t afford to ignore the possibility of a splinternet. As a business owner, you need to stay steps ahead as it would be a challenge connecting with your customers when caught up in the changes.
Businesses need to know how to follow consumers to new environments – and this could mean a bigger budget is required for development and testing different markets. Given that technological changes happen gradually, it’s advisable to keep tabs on tech trends and adjust accordingly.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
When it comes to determining depreciation for Furniture, Fixtures and Equipment (FF&E), there are many considerations that exist for accountants and business owners.
Defining Furniture, Fixtures and Equipment
FF&E refers to expenses for business items that are not affixed to the building where that business operates. Real-world examples of depreciable assets include chairs, desks, phones, tables, cabinets, etc., which are used to perform business-related tasks, directly or indirectly. These types of items are associated with long-term use, generally more than 12 months, according to the Internal Revenue Service.
Understanding How It Works
When it comes to accounting for the expense of the item, it can be depreciated equally and discreetly over its useful life. According to the IRS’ General Depreciation System (GDS), these office items, such as safes, desks, and files, are expected to have a seven-year life.
While there are different approaches to calculating depreciation, a common way to do so is through straight-line depreciation. This method is used by many organizations, including The Federal Reserve, and it works by starting with how much the item costs to acquire or its adjusted basis. From there, the item’s cost is reduced by the salvage value or the asset’s value after its useful life. The resulting figure is divided by the number of months of the asset’s useful life. Once the asset has exhausted this amount of time, it remains on the books as its salvage value until it’s sold or removed from service.
Using the straight-line method, a company might find the monthly depreciation charge for a truck purchase like this. The company purchases a new truck for $40,000; assuming a 60-month useful life allowable by the IRS and a 20 percent salvage value, the formula would be as follows:
$40,000 – (20 percent x $40,000) / 60 months
$40,000 – ($8,000) / 60 months
$32,000 / 60 = $533.33 per month for monthly depreciation
Special Considerations
In addition to tangible property, some intangible property also can be depreciated under the right circumstances. Examples of the IRS cites of this primarily intellectual property include copyrights, patents, and software. Conditions for depreciation of this type of intangible property include that it must be owned by the business owner, used within the business or for profit-related activities, have a useful life, and can be used by the business for more than a year.
The IRS gives an example of an individual buying a patent for $5,100. Using the straight-line method, the IRS permits this type of non-section 197 intangible property to be depreciated under certain conditions. The owner then must reduce any salvage value from the non-section 197 intangible property’s adjusted basis and depreciate it over the patent’s useful life, prorating terms less than a year, if applicable.
Eligible Intangible Property Example
Assume the individual bought a patent in May to be used starting June 1 of the same year. The patent was bought for $5,100, has a 17-year useful life and won’t have any salvage value.
The first year of depreciation must be prorated for six months since it will be used from June to December of the first year. Taking these circumstances and rules from the IRS, the first year’s depreciation available is $150. Each subsequent year, the remaining 16 will be $300.
While there are many intricacies for depreciation, understanding how it applies to each business’ operations will help give a fair assessment of an equipment’s value.
Tag Cloud:
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Furniture, Fixtures and Equipment – and Depreciation
December 1, 2019 · Blog, General Business News
⏱ 4 min read
When it comes to determining depreciation for Furniture, Fixtures and Equipment (FF&E), there are many considerations that exist for accountants and business owners.
Defining Furniture, Fixtures and Equipment
FF&E refers to expenses for business items that are not affixed to the building where that business operates. Real-world examples of depreciable assets include chairs, desks, phones, tables, cabinets, etc., which are used to perform business-related tasks, directly or indirectly. These types of items are associated with long-term use, generally more than 12 months, according to the Internal Revenue Service.
Understanding How It Works
When it comes to accounting for the expense of the item, it can be depreciated equally and discreetly over its useful life. According to the IRS’ General Depreciation System (GDS), these office items, such as safes, desks, and files, are expected to have a seven-year life.
While there are different approaches to calculating depreciation, a common way to do so is through straight-line depreciation. This method is used by many organizations, including The Federal Reserve, and it works by starting with how much the item costs to acquire or its adjusted basis. From there, the item’s cost is reduced by the salvage value or the asset’s value after its useful life. The resulting figure is divided by the number of months of the asset’s useful life. Once the asset has exhausted this amount of time, it remains on the books as its salvage value until it’s sold or removed from service.
Using the straight-line method, a company might find the monthly depreciation charge for a truck purchase like this. The company purchases a new truck for $40,000; assuming a 60-month useful life allowable by the IRS and a 20 percent salvage value, the formula would be as follows:
$40,000 – (20 percent x $40,000) / 60 months
$40,000 – ($8,000) / 60 months
$32,000 / 60 = $533.33 per month for monthly depreciation
Special Considerations
In addition to tangible property, some intangible property also can be depreciated under the right circumstances. Examples of the IRS cites of this primarily intellectual property include copyrights, patents, and software. Conditions for depreciation of this type of intangible property include that it must be owned by the business owner, used within the business or for profit-related activities, have a useful life, and can be used by the business for more than a year.
The IRS gives an example of an individual buying a patent for $5,100. Using the straight-line method, the IRS permits this type of non-section 197 intangible property to be depreciated under certain conditions. The owner then must reduce any salvage value from the non-section 197 intangible property’s adjusted basis and depreciate it over the patent’s useful life, prorating terms less than a year, if applicable.
Eligible Intangible Property Example
Assume the individual bought a patent in May to be used starting June 1 of the same year. The patent was bought for $5,100, has a 17-year useful life and won’t have any salvage value.
The first year of depreciation must be prorated for six months since it will be used from June to December of the first year. Taking these circumstances and rules from the IRS, the first year’s depreciation available is $150. Each subsequent year, the remaining 16 will be $300.
While there are many intricacies for depreciation, understanding how it applies to each business’ operations will help give a fair assessment of an equipment’s value.
Tag Cloud:
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These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
National POW/MIA Flag Act (S 693) – This bill amended title 36 of the United States Code to require that the POW/MIA flag be displayed on all days that the flag of the United States is displayed on certain federal properties. Previously, the POW/MIA flag was displayed only on Armed Forces Day, Memorial Day, Flag Day, Independence Day, National POW/MIA Recognition Day and Veterans Day. The legislation was introduced by Sen. Elizbeth Warren (D-MA) on March 7. It was passed in the Senate on May 2, passed in the House on Oct. 22 and signed into law by the president on Nov. 7.
Hidden Figures Congressional Gold Medal Act (HR 1396) – This legislation awards Congressional Gold Medals to Katherine Johnson and Dr. Christine Darden, and posthumously to Dorothy Vaughan and Mary Jackson, as well as all of the women who contributed to the success of the National Aeronautics and Space Administration during the Space Race. The legislation was sponsored by Rep. Eddie Johnson (D-TX). It was introduced on Feb. 27, passed in the House on Sept. 19, in the Senate on Oct. 17 and then signed into law by the president on Nov. 8.
Rebuilding Small Businesses After Disasters Act (S 862) – Introduced on March 25 by Sen. John Kennedy (R-LA), this bill makes permanent the increased collateral requirements for major-disaster loans issued by the Small Business Administration. It passed the Senate on Aug. 1, the House on Nov. 20, and is currently awaiting signature by the president to enact into law.
Hong Kong Human Rights and Democracy Act of 2019 (S 1838) – In response to the millions of Hong Kong citizens who have protested and demonstrated for government reform since last June, this bill authorizes three actions. 1) Requires the State Department to recertify Hong Kong’s autonomous status each year in order to continue receiving special treatment by the United States; 2) mandates the U.S. government identify anyone involved in abductions or extraditions of Hong Kong protesters or citizens to mainland China, plus freezes any U.S.-based assets and denies them entry into the United States; and 3) clarifies under federal law that no one should be denied a visa to the United States on the basis of participating in Hong Kong protests. The bill was introduced on June 13 by Sen. Marco Rubio (R-FL) and passed both Houses of Congress in November. It is currently with the president, who may sign or veto the bill.
A bill to prohibit the commercial export of covered munitions items to the Hong Kong Police Force (S 2710) – This legislation prohibits the issuance of licenses to export certain munition items to the Hong Kong Police Force and the Hong Kong Auxiliary Police Force, such as tear gas, rubber bullets and handcuffs. The bill does allow for the president to make an exception upon certifying to Congress how such exports would be advantageous to U.S. national interests and foreign policy goals. This prohibition would expire one year after enactment. The bill was introduced on Oct. 24 by Sen. Jeff Merkley (D-OR) and passed in Congress on Nov. 20. It is currently awaiting signature by the president.
Preventing Animal Cruelty and Torture Act or the PACT Act (HR 724) – This bill expands criminal provisions with respect to animal crushing (torture by stepping on an animal). It subjects violators to criminal prosecution for intentionally crushing an animal, or knowingly creating or distributing an animal crush video using interstate commerce. Criminal penalties include a fine, a prison term of up to seven years, or both. The bill was introduced by Rep. Theodore Deutch (D-FL) on Jan. 23, passed the two Houses of Congress in October and November, and is currently awaiting to be signed into law.
Hanging Flags, Awarding Geniuses, Supporting Hong Kong Protestors and Criminalizing Animal Cruelty
December 1, 2019 · Blog, Congress at Work
⏱ 4 min read
National POW/MIA Flag Act (S 693) – This bill amended title 36 of the United States Code to require that the POW/MIA flag be displayed on all days that the flag of the United States is displayed on certain federal properties. Previously, the POW/MIA flag was displayed only on Armed Forces Day, Memorial Day, Flag Day, Independence Day, National POW/MIA Recognition Day and Veterans Day. The legislation was introduced by Sen. Elizbeth Warren (D-MA) on March 7. It was passed in the Senate on May 2, passed in the House on Oct. 22 and signed into law by the president on Nov. 7.
Hidden Figures Congressional Gold Medal Act (HR 1396) – This legislation awards Congressional Gold Medals to Katherine Johnson and Dr. Christine Darden, and posthumously to Dorothy Vaughan and Mary Jackson, as well as all of the women who contributed to the success of the National Aeronautics and Space Administration during the Space Race. The legislation was sponsored by Rep. Eddie Johnson (D-TX). It was introduced on Feb. 27, passed in the House on Sept. 19, in the Senate on Oct. 17 and then signed into law by the president on Nov. 8.
Rebuilding Small Businesses After Disasters Act (S 862) – Introduced on March 25 by Sen. John Kennedy (R-LA), this bill makes permanent the increased collateral requirements for major-disaster loans issued by the Small Business Administration. It passed the Senate on Aug. 1, the House on Nov. 20, and is currently awaiting signature by the president to enact into law.
Hong Kong Human Rights and Democracy Act of 2019 (S 1838) – In response to the millions of Hong Kong citizens who have protested and demonstrated for government reform since last June, this bill authorizes three actions. 1) Requires the State Department to recertify Hong Kong’s autonomous status each year in order to continue receiving special treatment by the United States; 2) mandates the U.S. government identify anyone involved in abductions or extraditions of Hong Kong protesters or citizens to mainland China, plus freezes any U.S.-based assets and denies them entry into the United States; and 3) clarifies under federal law that no one should be denied a visa to the United States on the basis of participating in Hong Kong protests. The bill was introduced on June 13 by Sen. Marco Rubio (R-FL) and passed both Houses of Congress in November. It is currently with the president, who may sign or veto the bill.
A bill to prohibit the commercial export of covered munitions items to the Hong Kong Police Force (S 2710) – This legislation prohibits the issuance of licenses to export certain munition items to the Hong Kong Police Force and the Hong Kong Auxiliary Police Force, such as tear gas, rubber bullets and handcuffs. The bill does allow for the president to make an exception upon certifying to Congress how such exports would be advantageous to U.S. national interests and foreign policy goals. This prohibition would expire one year after enactment. The bill was introduced on Oct. 24 by Sen. Jeff Merkley (D-OR) and passed in Congress on Nov. 20. It is currently awaiting signature by the president.
Preventing Animal Cruelty and Torture Act or the PACT Act (HR 724) – This bill expands criminal provisions with respect to animal crushing (torture by stepping on an animal). It subjects violators to criminal prosecution for intentionally crushing an animal, or knowingly creating or distributing an animal crush video using interstate commerce. Criminal penalties include a fine, a prison term of up to seven years, or both. The bill was introduced by Rep. Theodore Deutch (D-FL) on Jan. 23, passed the two Houses of Congress in October and November, and is currently awaiting to be signed into law.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
It may be hard to believe, but the end of the year is upon us. During this time, many of us might reflect on the year and tally up the good and the bad, the pros and the cons of the past 12 months. In a society that focuses on success and getting ahead, probably the most common thing to do is zero in on what you didn’t accomplish, or what went wrong. But science tells us that if you’re smart, you’ll look back with gratitude. And the best news is: it’s good for our health.
Gratitude Changes Your Brain – For the Better
When you give thanks for positive things in your life and show appreciation, it literally changes the structure of your brain, according to UCLA’s Mindfulness Awareness Research Center. It keeps the gray matter functioning and causes synchronized activation in multiple brain regions, lighting up parts of the brain’s reward pathways and the hypothalamus. It’s kind of like an anti-depressant: it boosts neurotransmitter serotonin and causes the brain stem to produce dopamine, a chemical that mediates pleasure in the brain. In short, thinking about what you’re grateful for is kind of like free therapy.
Make a List of Your Successes
So now that you know how gratitude works, make a list of what you’ve accomplished this year. It doesn’t have to be big and dramatic; for instance: you ate at home more often. You decided to recycle. You drank more water. However, if you got a promotion and raise, by all means write it down and feel good about it. Besides, there’s more that happens: when you’re feeling grateful, you generate higher levels of activity in your hypothalamus, the area which controls a large array of essential body functions, like eating, drinking and sleeping. According to the National Institute of Health (NIH), this activity prompts you to exercise more, get better sleep and, best of all, decreases depression and bodily aches and pains. How’s that for some motivation to put pen to paper?
Keep a Journal for Next Year
As you can see, being grateful is beneficial, both mentally and physically. So why not keep a journal for the upcoming year? It doesn’t have to be fancy. Granted, a journal helps organize your thoughts and can be your go-to source should you start feeling down. But practicing gratitude can be as simple as jotting down your thoughts on a sticky note and posting it on your mirror. Another way to do this is to pick a gratitude buddy. When you think of something you’re thankful for, text or email a friend. Don’t worry about it sounding right, just do it! Chances are, it’ll not only make you feel better, it might brighten your friend’s day, too.
Just Look for Positive Things
According to Dr. Alex Korb in his book “Upward Spiral,” the simple act of seeking things to be grateful for has as much if not more benefit than the things you are actually grateful for. Korb says that the search “forces you to focus on the positive aspects of your life. This simple act increases serotonin production in the anterior cingulate cortex.” This area of the brain not only regulates blood pressure and heart rate, it’s also responsible for decision making and evaluation processes. Serotonin is good stuff: it’s known as the happy chemical. See how good this gratitude thing is?
So, in the coming year, if you start feeling blue and negative, here are some quick remedies:
Look in the mirror and name five things you like about yourself.
Write someone a thank you note.
When something bad happens, think of something good that’s happened.
Give someone a compliment. The act of giving is soul-nourishing: to give is to receive.
Here’s to looking back and feeling good, then moving forward with positive vibes!
It may be hard to believe, but the end of the year is upon us. During this time, many of us might reflect on the year and tally up the good and the bad, the pros and the cons of the past 12 months. In a society that focuses on success and getting ahead, probably the most common thing to do is zero in on what you didn’t accomplish, or what went wrong. But science tells us that if you’re smart, you’ll look back with gratitude. And the best news is: it’s good for our health.
Gratitude Changes Your Brain – For the Better
When you give thanks for positive things in your life and show appreciation, it literally changes the structure of your brain, according to UCLA’s Mindfulness Awareness Research Center. It keeps the gray matter functioning and causes synchronized activation in multiple brain regions, lighting up parts of the brain’s reward pathways and the hypothalamus. It’s kind of like an anti-depressant: it boosts neurotransmitter serotonin and causes the brain stem to produce dopamine, a chemical that mediates pleasure in the brain. In short, thinking about what you’re grateful for is kind of like free therapy.
Make a List of Your Successes
So now that you know how gratitude works, make a list of what you’ve accomplished this year. It doesn’t have to be big and dramatic; for instance: you ate at home more often. You decided to recycle. You drank more water. However, if you got a promotion and raise, by all means write it down and feel good about it. Besides, there’s more that happens: when you’re feeling grateful, you generate higher levels of activity in your hypothalamus, the area which controls a large array of essential body functions, like eating, drinking and sleeping. According to the National Institute of Health (NIH), this activity prompts you to exercise more, get better sleep and, best of all, decreases depression and bodily aches and pains. How’s that for some motivation to put pen to paper?
Keep a Journal for Next Year
As you can see, being grateful is beneficial, both mentally and physically. So why not keep a journal for the upcoming year? It doesn’t have to be fancy. Granted, a journal helps organize your thoughts and can be your go-to source should you start feeling down. But practicing gratitude can be as simple as jotting down your thoughts on a sticky note and posting it on your mirror. Another way to do this is to pick a gratitude buddy. When you think of something you’re thankful for, text or email a friend. Don’t worry about it sounding right, just do it! Chances are, it’ll not only make you feel better, it might brighten your friend’s day, too.
Just Look for Positive Things
According to Dr. Alex Korb in his book “Upward Spiral,” the simple act of seeking things to be grateful for has as much if not more benefit than the things you are actually grateful for. Korb says that the search “forces you to focus on the positive aspects of your life. This simple act increases serotonin production in the anterior cingulate cortex.” This area of the brain not only regulates blood pressure and heart rate, it’s also responsible for decision making and evaluation processes. Serotonin is good stuff: it’s known as the happy chemical. See how good this gratitude thing is?
So, in the coming year, if you start feeling blue and negative, here are some quick remedies:
Look in the mirror and name five things you like about yourself.
Write someone a thank you note.
When something bad happens, think of something good that’s happened.
Give someone a compliment. The act of giving is soul-nourishing: to give is to receive.
Here’s to looking back and feeling good, then moving forward with positive vibes!
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
The markets are hitting all-time highs, so if you are thinking of selling stocks now or in the near future, there is a good chance that you will have capital gains on the sale. If you’ve held the stocks for more than a year, then they will qualify for the more favorable long-term capital gains tax (instead of being taxed at ordinary income rates for short-term sales). But the total tax due can still be enough to warrant some tax planning. Luckily, the tax laws provide for several ways to defer or even completely avoid paying taxes on your securities sales.
1. Using Tax Losses
Utilizing losses is the least attractive of all the options in this article since you obviously had to lose money on one security in order to avoid paying taxes on another. The real play here is what is often referred to as tax-loss harvesting. This is where you purposely sell shares that are at a loss position in order to offset the gains on profitable sales and then redeploy this capital somewhere else. You’ll need to carefully weigh where to put the money from the sale of the shares sold at a loss as you can’t just buy the same stocks back. This is considered a “wash sale” and invalidates the strategy.
2. The 10 Percent to 15 Percent Tax Bracket
For taxpayers in either the 10 percent or 12 percent income tax brackets, their long-term capital gains rate is 0 percent. The income caps for qualifying for the 12 percent income tax rate is $39,375 for single filers and $78,750 for joint filers in 2019 ($40,000 and $80,000, respectively in 2020). Also, keep in mind that the stock sales themselves add to this limit – so calculate carefully.
Aside from selling appreciated securities yourself, another way to take advantage of the 0 percent bracket is to gift the stock to someone else instead of selling the securities and then giving the cash. Beware, however, as trying to do this with your kids can disqualify the 0 percent treatment because the kiddie tax is triggered on gifted stock sold to children younger than 19 or under 24 if a full-time student.
3. Donate
Donating appreciated securities is where we start to get into the more beneficial strategies. This technique only makes sense if you were already planning to make charitable contributions. Say for example you are planning to donate $10,000 to an organization and are in the 25 percent tax bracket. In order to write a donation check for $10,000, you would have had to earn $13,333 in income to sell the same amount of stock in order to have $10,000 left after taxes to make a cash donation in that amount.
If you donate appreciated stock instead, you only need to donate securities valued at $10,000 and you get to deduct $10,000 as a charitable deduction. That avoids the capital gains tax completely. Plus, it generates for you a bigger tax deduction for the full market value of donated shares held more than one year – and it results in a larger donation.
4. Qualified Opportunity Zones
This is the newest and most complicated (as well as controversial) way to defer or avoid capital gains taxes. Opportunity Zones were created via the Tax Cuts and Jobs Act to encourage investment in low-income and distressed communities. Qualified Opportunity Zones can defer or eliminate capital gains tax by utilizing three mechanisms through Opportunity Funds – the investment vehicle that invests in Opportunity Zones.
First, they offer a temporary deferral of taxes on previously earned capital gains if investors place existing assets into Opportunity Funds. These capital gains defer taxation until the end of 2026 or whenever the asset is disposed of – whichever is first.
Second, capital gains placed in Opportunity Funds for a minimum of five years receive a step-up in basis of 10 percent – and if held for at least seven years, 15 percent.
Third, they offer an opportunity to permanently avoid taxation on new capital gains. If the opportunity fund is held for at least 10 years, the investor will pay no tax on capital gains earned through the Opportunity Fund.
Again, the caveat here is that the details of Opportunity Zone investments can be extremely complicated, so it’s best not to attempt this one on your own. Consult with your tax advisor.
5. Die with Appreciated Stock
Unfortunately, while probably the least popular method for readers, this is certainly the most effective. When a person passes away, the cost basis of their securities receives a step-up in basis to the fair market value to the date of their death. As an example, if you purchased Amazon stock for $50 per share and when you pass away it is worth $1,700 per share, your heir’s basis in the inherited stock is $1,700. This means if they sell it at $1,700, they pay no tax at all.
Conclusion
None of the above methods are loopholes or tax dodges; they are all completely legitimate. However, your ability to take advantage of these techniques will depend on your income level, personal goals and even your age. As a result, it’s best to consult with your tax advisor to see what makes sense for your personal situation.
How to Defer, Avoid Paying Capital Gains Tax on Stock Sales
December 1, 2019 · Blog, Tax and Financial News
⏱ 5 min read
The markets are hitting all-time highs, so if you are thinking of selling stocks now or in the near future, there is a good chance that you will have capital gains on the sale. If you’ve held the stocks for more than a year, then they will qualify for the more favorable long-term capital gains tax (instead of being taxed at ordinary income rates for short-term sales). But the total tax due can still be enough to warrant some tax planning. Luckily, the tax laws provide for several ways to defer or even completely avoid paying taxes on your securities sales.
1. Using Tax Losses
Utilizing losses is the least attractive of all the options in this article since you obviously had to lose money on one security in order to avoid paying taxes on another. The real play here is what is often referred to as tax-loss harvesting. This is where you purposely sell shares that are at a loss position in order to offset the gains on profitable sales and then redeploy this capital somewhere else. You’ll need to carefully weigh where to put the money from the sale of the shares sold at a loss as you can’t just buy the same stocks back. This is considered a “wash sale” and invalidates the strategy.
2. The 10 Percent to 15 Percent Tax Bracket
For taxpayers in either the 10 percent or 12 percent income tax brackets, their long-term capital gains rate is 0 percent. The income caps for qualifying for the 12 percent income tax rate is $39,375 for single filers and $78,750 for joint filers in 2019 ($40,000 and $80,000, respectively in 2020). Also, keep in mind that the stock sales themselves add to this limit – so calculate carefully.
Aside from selling appreciated securities yourself, another way to take advantage of the 0 percent bracket is to gift the stock to someone else instead of selling the securities and then giving the cash. Beware, however, as trying to do this with your kids can disqualify the 0 percent treatment because the kiddie tax is triggered on gifted stock sold to children younger than 19 or under 24 if a full-time student.
3. Donate
Donating appreciated securities is where we start to get into the more beneficial strategies. This technique only makes sense if you were already planning to make charitable contributions. Say for example you are planning to donate $10,000 to an organization and are in the 25 percent tax bracket. In order to write a donation check for $10,000, you would have had to earn $13,333 in income to sell the same amount of stock in order to have $10,000 left after taxes to make a cash donation in that amount.
If you donate appreciated stock instead, you only need to donate securities valued at $10,000 and you get to deduct $10,000 as a charitable deduction. That avoids the capital gains tax completely. Plus, it generates for you a bigger tax deduction for the full market value of donated shares held more than one year – and it results in a larger donation.
4. Qualified Opportunity Zones
This is the newest and most complicated (as well as controversial) way to defer or avoid capital gains taxes. Opportunity Zones were created via the Tax Cuts and Jobs Act to encourage investment in low-income and distressed communities. Qualified Opportunity Zones can defer or eliminate capital gains tax by utilizing three mechanisms through Opportunity Funds – the investment vehicle that invests in Opportunity Zones.
First, they offer a temporary deferral of taxes on previously earned capital gains if investors place existing assets into Opportunity Funds. These capital gains defer taxation until the end of 2026 or whenever the asset is disposed of – whichever is first.
Second, capital gains placed in Opportunity Funds for a minimum of five years receive a step-up in basis of 10 percent – and if held for at least seven years, 15 percent.
Third, they offer an opportunity to permanently avoid taxation on new capital gains. If the opportunity fund is held for at least 10 years, the investor will pay no tax on capital gains earned through the Opportunity Fund.
Again, the caveat here is that the details of Opportunity Zone investments can be extremely complicated, so it’s best not to attempt this one on your own. Consult with your tax advisor.
5. Die with Appreciated Stock
Unfortunately, while probably the least popular method for readers, this is certainly the most effective. When a person passes away, the cost basis of their securities receives a step-up in basis to the fair market value to the date of their death. As an example, if you purchased Amazon stock for $50 per share and when you pass away it is worth $1,700 per share, your heir’s basis in the inherited stock is $1,700. This means if they sell it at $1,700, they pay no tax at all.
Conclusion
None of the above methods are loopholes or tax dodges; they are all completely legitimate. However, your ability to take advantage of these techniques will depend on your income level, personal goals and even your age. As a result, it’s best to consult with your tax advisor to see what makes sense for your personal situation.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
With the start of the fourth quarter of 2019 underway, it’s time to see what the Internal Revenue Service (IRS) will expect of filers for their 2019 taxes. The following are a list of major changes that filers need to be aware of:
1. Removal of the Affordable Care Act’s (ACA) Individual Mandate Penalty
With the passage of the Tax Cuts and Jobs Act (TCJA), filers and households who failed to carry adequate health insurance according to the ACA’s minimum coverage requirements will no longer have to pay the penalty on their 2019 taxes. This is because the TCJA lowered the penalty to zero dollars permanently. In previous years, households not meeting ACA health insurance requirements were mandated to pay either 2.5 percent of household income or $347.50 per child and $695 per adult, up to $2,085.
2. Greater Medical Expense Deduction Requirements
2019 filers are only able to deduct out-of-pocket medical expenses that exceed 10 percent of their adjusted gross income (AGI). The threshold was lowered to 7.5 percent for the 2017 and 2018 tax years by the TCJA, but will revert to the original 10 percent threshold in 2019.
3. Changes to Treatment of Alimony
The TCJA removed the ability for those paying alimony to their former spouse to deduct these payments for the 2019 tax year. The IRS also removed deductibility for alimony or separate maintenance payments for divorce or separation agreements signed off after Dec. 31, 2018. If a divorce or separation agreement that provides for alimony or separate maintenance payments was agreed to before Dec. 31, 2018, and is then modified after Dec. 31, 2018, such payments lose deductibility. Former spouses receiving alimony or separate maintenance payments from an agreement created or modified after Dec. 31, 2018, are not required to report such payments on their tax return.
4. Contribution Limits Raised for Retirement Accounts
Those with 401(k), almost all 457 plans, the federal government’s Thrift Savings Plan and 403(b) account plans can contribute $19,000 in 2019, an increase of $500 from 2018’s $18,500 limit. Taxpayers 50 and older can still contribute another $6,000 for 2019, a catch-up contribution. Taxpayers with Individual Retirement Accounts (IRAs) can contribute $6,000 in 2019, $500 more than 2018’s $5,500 limit. Those 50 years or older can add another $1,000 to their IRA accounts in 2019. The increase in IRA contribution limits is the first increase since 2013.
5. Increased HSA Contribution Limits
Health Savings Accounts’ contribution limits for 2019 have increased, according to the IRS. For an individual or a self-only High Deductible Health Plan, 2019’s contribution limit is raised to $3,500, or $50 more than 2018’s contribution limit of $3,450. For a family high deductible health plan, 2019’s contribution limit is raised to $7,000, $100 more than 2018’s contribution limit of $6,900. The catch-up contribution is an extra $1,000 for account holders age 55 or older.
6. Increasing Standard Deduction Allowances
For those choosing not to itemize their deductions in 2019, the IRS has increased standard deduction amounts for filers. For single filers and those filing as married filing separately, the standard deduction increased by $200, to $12,200. For those filing as head of household, the standard deduction increased by $350, to $18,350. For those choosing to file married filing jointly, there’s an increased allowance of $400, to $24,400.
7. 2019 Income Brackets
With the new tax year comes higher income tax brackets. Depending on how much taxpayers made in 2019, the following are the new income level brackets:
37 percent: Individual single taxpayers making more than $510,300 or married couples filing jointly making $612,350.
35 percent: Individuals making more than $204,100, or $408,200 for married couples filing jointly.
32 percent: Individuals making more than $160,725, or $321,450 for married couples filing jointly.
24 percent: Individuals making more than $84,200, or $168,400 for married couples filing jointly.
22 percent: Individuals making more than $39,475, or $78,950 for married couples filing jointly.
12 percent: Individuals making more than $9,700, or $19,400 for married couples filing jointly.
10 percent: Individuals making up to $9,700, or $19,400 for married couples filing jointly.
Tax Changes 2019
November 1, 2019 · Blog, Tax and Financial News
⏱ 4 min read
With the start of the fourth quarter of 2019 underway, it’s time to see what the Internal Revenue Service (IRS) will expect of filers for their 2019 taxes. The following are a list of major changes that filers need to be aware of:
1. Removal of the Affordable Care Act’s (ACA) Individual Mandate Penalty
With the passage of the Tax Cuts and Jobs Act (TCJA), filers and households who failed to carry adequate health insurance according to the ACA’s minimum coverage requirements will no longer have to pay the penalty on their 2019 taxes. This is because the TCJA lowered the penalty to zero dollars permanently. In previous years, households not meeting ACA health insurance requirements were mandated to pay either 2.5 percent of household income or $347.50 per child and $695 per adult, up to $2,085.
2. Greater Medical Expense Deduction Requirements
2019 filers are only able to deduct out-of-pocket medical expenses that exceed 10 percent of their adjusted gross income (AGI). The threshold was lowered to 7.5 percent for the 2017 and 2018 tax years by the TCJA, but will revert to the original 10 percent threshold in 2019.
3. Changes to Treatment of Alimony
The TCJA removed the ability for those paying alimony to their former spouse to deduct these payments for the 2019 tax year. The IRS also removed deductibility for alimony or separate maintenance payments for divorce or separation agreements signed off after Dec. 31, 2018. If a divorce or separation agreement that provides for alimony or separate maintenance payments was agreed to before Dec. 31, 2018, and is then modified after Dec. 31, 2018, such payments lose deductibility. Former spouses receiving alimony or separate maintenance payments from an agreement created or modified after Dec. 31, 2018, are not required to report such payments on their tax return.
4. Contribution Limits Raised for Retirement Accounts
Those with 401(k), almost all 457 plans, the federal government’s Thrift Savings Plan and 403(b) account plans can contribute $19,000 in 2019, an increase of $500 from 2018’s $18,500 limit. Taxpayers 50 and older can still contribute another $6,000 for 2019, a catch-up contribution. Taxpayers with Individual Retirement Accounts (IRAs) can contribute $6,000 in 2019, $500 more than 2018’s $5,500 limit. Those 50 years or older can add another $1,000 to their IRA accounts in 2019. The increase in IRA contribution limits is the first increase since 2013.
5. Increased HSA Contribution Limits
Health Savings Accounts’ contribution limits for 2019 have increased, according to the IRS. For an individual or a self-only High Deductible Health Plan, 2019’s contribution limit is raised to $3,500, or $50 more than 2018’s contribution limit of $3,450. For a family high deductible health plan, 2019’s contribution limit is raised to $7,000, $100 more than 2018’s contribution limit of $6,900. The catch-up contribution is an extra $1,000 for account holders age 55 or older.
6. Increasing Standard Deduction Allowances
For those choosing not to itemize their deductions in 2019, the IRS has increased standard deduction amounts for filers. For single filers and those filing as married filing separately, the standard deduction increased by $200, to $12,200. For those filing as head of household, the standard deduction increased by $350, to $18,350. For those choosing to file married filing jointly, there’s an increased allowance of $400, to $24,400.
7. 2019 Income Brackets
With the new tax year comes higher income tax brackets. Depending on how much taxpayers made in 2019, the following are the new income level brackets:
37 percent: Individual single taxpayers making more than $510,300 or married couples filing jointly making $612,350.
35 percent: Individuals making more than $204,100, or $408,200 for married couples filing jointly.
32 percent: Individuals making more than $160,725, or $321,450 for married couples filing jointly.
24 percent: Individuals making more than $84,200, or $168,400 for married couples filing jointly.
22 percent: Individuals making more than $39,475, or $78,950 for married couples filing jointly.
12 percent: Individuals making more than $9,700, or $19,400 for married couples filing jointly.
10 percent: Individuals making up to $9,700, or $19,400 for married couples filing jointly.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Terrorist and Foreign Fighter Travel Exercise Act of 2019 (HR 1590) – This bill promotes the identification and determent of terrorist activity from reaching the homeland, and enhances the United States government’s ability to respond to terrorism, including emerging threats. Specifically, the legislation requires the Department of Homeland Security to develop and conduct exercises related to foreign terrorism, including the National Incident Management System, National Response Plan, and other related plans and strategies. The legislation was introduced on March 7 by Rep. Michael Guest (R-MS). The president signed the bill into law on Oct. 9.
Alaska Remote Generator Reliability and Protection Act (S 163) – This bill is designed to prevent catastrophic failure or shutdown of remote diesel power engines due to emission control devices in remote areas of Alaska. It instructs the Environmental Protection Agency (EPA) to revise particulate matter emissions standards for nonemergency stationary diesel engines, and to report on methods for assisting these areas in meeting specified energy needs. The legislation was introduced by Rep. Dan Sullivan (R-AK) on Jan. 16 and signed into law by the president on Oct. 4.
A bill to permit States to transfer certain funds from the clean water revolving fund of a State to the drinking water revolving fund of the State in certain circumstances, and for other purposes (S 1689) – Introduced on May 23 by Rep. Cory Booker (D-NJ), this legislation was enacted on Oct. 4. The bill empowers states with the ability to transfer up to 5 percent of federal grant funds from its clean water fund to its drinking water fund to help address any threats to public health resulting from increased exposure to lead in drinking water. This reallocation is available for only one year.
Autism Collaboration, Accountability, Research, Education and Support Act of 2019 (HR 1058) – This legislation reauthorizes the previous Autism CARES Act of 2014 to expand government programs to include older people with autism who are often misdiagnosed and underdiagnosed. The bill allocates $1.8 billion in funding for autism programs to the Centers for Disease Control and Prevention, National Institutes of Health and the Health Resources & Services Administration. The legislation was sponsored by Rep. Chris Smith (R-NJ). It was introduced on Feb. 7 and signed into law by the president on Sept. 30.
Department of Veterans Affairs Expiring Authorities Act of 2019 (HR 4285) – This legislation reauthorizes funding for programs and services at the Veterans Administration, which were set to expire at the end of the fiscal year on Sept. 30. The bill extends funding for two specific programs. 1.) Keeping Our Commitment to Overseas Veterans Act of 2019, to keep the VA Regional Office and Outpatient Clinic in Manila, Philippines, open for business through Sept. 30, 2020. This clinic provides healthcare, benefits and services to thousands of U.S. veterans living in the Philippines. 2.) Supportive Services for Veteran Families program (through Sept. 30, 2021), which provides grants for supportive services to assist very low-income veterans and their families who are either residing in permanent housing or transitioning from homelessness. The bill was introduced on Sept. 11 by Rep. Anthony Brindisi (D-NY) and was signed into law by the president on Sept. 30.
Continuing Appropriations Act, 2020, and Health Extenders Act of 2019 (HR 4378) – Known as a continuing resolution (CR), this bill prevents a government shutdown by continuing fiscal year 2020 appropriations to federal agencies through Nov. 21. The bill was introduced by Rep. Nita Lowey (D-NY) on Sept. 18 and signed into law on Sept. 27.
National Defense Authorization Act for Fiscal Year 2020 (S 1790) – Introduced on June 11 by Rep. Jim Inhofe (R-OK), this is an original bill that authorizes U.S. Military appropriations for fiscal year 2020 for the Department of Defense, military construction and Department of Energy defense activities. The legislation both authorizes appropriations and sets forth policies, requirements and limitations for how funds are used. The legislation was passed by Congress on Sept. 17 and is currently awaiting signature by the president.
Fighting Foreign Terrorism on Homeland Soil, Increased Protections for Clean Water and Low-Income Veterans, and New Appropriations for FY2020
November 1, 2019 · Blog, Congress at Work
⏱ 4 min read
Terrorist and Foreign Fighter Travel Exercise Act of 2019 (HR 1590) – This bill promotes the identification and determent of terrorist activity from reaching the homeland, and enhances the United States government’s ability to respond to terrorism, including emerging threats. Specifically, the legislation requires the Department of Homeland Security to develop and conduct exercises related to foreign terrorism, including the National Incident Management System, National Response Plan, and other related plans and strategies. The legislation was introduced on March 7 by Rep. Michael Guest (R-MS). The president signed the bill into law on Oct. 9.
Alaska Remote Generator Reliability and Protection Act (S 163) – This bill is designed to prevent catastrophic failure or shutdown of remote diesel power engines due to emission control devices in remote areas of Alaska. It instructs the Environmental Protection Agency (EPA) to revise particulate matter emissions standards for nonemergency stationary diesel engines, and to report on methods for assisting these areas in meeting specified energy needs. The legislation was introduced by Rep. Dan Sullivan (R-AK) on Jan. 16 and signed into law by the president on Oct. 4.
A bill to permit States to transfer certain funds from the clean water revolving fund of a State to the drinking water revolving fund of the State in certain circumstances, and for other purposes (S 1689) – Introduced on May 23 by Rep. Cory Booker (D-NJ), this legislation was enacted on Oct. 4. The bill empowers states with the ability to transfer up to 5 percent of federal grant funds from its clean water fund to its drinking water fund to help address any threats to public health resulting from increased exposure to lead in drinking water. This reallocation is available for only one year.
Autism Collaboration, Accountability, Research, Education and Support Act of 2019 (HR 1058) – This legislation reauthorizes the previous Autism CARES Act of 2014 to expand government programs to include older people with autism who are often misdiagnosed and underdiagnosed. The bill allocates $1.8 billion in funding for autism programs to the Centers for Disease Control and Prevention, National Institutes of Health and the Health Resources & Services Administration. The legislation was sponsored by Rep. Chris Smith (R-NJ). It was introduced on Feb. 7 and signed into law by the president on Sept. 30.
Department of Veterans Affairs Expiring Authorities Act of 2019 (HR 4285) – This legislation reauthorizes funding for programs and services at the Veterans Administration, which were set to expire at the end of the fiscal year on Sept. 30. The bill extends funding for two specific programs. 1.) Keeping Our Commitment to Overseas Veterans Act of 2019, to keep the VA Regional Office and Outpatient Clinic in Manila, Philippines, open for business through Sept. 30, 2020. This clinic provides healthcare, benefits and services to thousands of U.S. veterans living in the Philippines. 2.) Supportive Services for Veteran Families program (through Sept. 30, 2021), which provides grants for supportive services to assist very low-income veterans and their families who are either residing in permanent housing or transitioning from homelessness. The bill was introduced on Sept. 11 by Rep. Anthony Brindisi (D-NY) and was signed into law by the president on Sept. 30.
Continuing Appropriations Act, 2020, and Health Extenders Act of 2019 (HR 4378) – Known as a continuing resolution (CR), this bill prevents a government shutdown by continuing fiscal year 2020 appropriations to federal agencies through Nov. 21. The bill was introduced by Rep. Nita Lowey (D-NY) on Sept. 18 and signed into law on Sept. 27.
National Defense Authorization Act for Fiscal Year 2020 (S 1790) – Introduced on June 11 by Rep. Jim Inhofe (R-OK), this is an original bill that authorizes U.S. Military appropriations for fiscal year 2020 for the Department of Defense, military construction and Department of Energy defense activities. The legislation both authorizes appropriations and sets forth policies, requirements and limitations for how funds are used. The legislation was passed by Congress on Sept. 17 and is currently awaiting signature by the president.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Believe it or not, it’s 2020. You’re not just starting a new year, you’re entering a new decade. With this in mind, you might want to make some resolutions that focus on your finances. According to Psychology Today, 
Eric Schmidt, former Google CEO, made a prediction in September 2018 that the internet will split in two – one part being led by China and the other by the United States. The reasoning behind this involves China’s active monitoring of all internet activities, as well as technological products and services from the country. Other reasons include a different leadership regime, controls and censorship.
When it comes to determining depreciation for Furniture, Fixtures and Equipment (FF&E), there are many considerations that exist for accountants and business owners.
National POW/MIA Flag Act (S 693) – This bill amended title 36 of the United States Code to require that the POW/MIA flag be displayed on all days that the flag of the United States is displayed on certain federal properties. Previously, the POW/MIA flag was displayed only on Armed Forces Day, Memorial Day, Flag Day, Independence Day, National POW/MIA Recognition Day and Veterans Day. The legislation was introduced by Sen. Elizbeth Warren (D-MA) on March 7. It was passed in the Senate on May 2, passed in the House on Oct. 22 and signed into law by the president on Nov. 7.
It may be hard to believe, but the end of the year is upon us. During this time, many of us might reflect on the year and tally up the good and the bad, the pros and the cons of the past 12 months. In a society that focuses on success and getting ahead, probably the most common thing to do is zero in on what you didn’t accomplish, or what went wrong. But science tells us that if you’re smart, you’ll look back with gratitude. And the best news is: it’s good for our health.
The markets are hitting all-time highs, so if you are thinking of selling stocks now or in the near future, there is a good chance that you will have capital gains on the sale. If you’ve held the stocks for more than a year, then they will qualify for the more favorable long-term capital gains tax (instead of being taxed at ordinary income rates for short-term sales). But the total tax due can still be enough to warrant some tax planning. Luckily, the tax laws provide for several ways to defer or even completely avoid paying taxes on your securities sales.
With the start of the fourth quarter of 2019 underway, it’s time to see what the Internal Revenue Service (IRS) will expect of filers for their 2019 taxes. The following are a list of major changes that filers need to be aware of:
Terrorist and Foreign Fighter Travel Exercise Act of 2019 (HR 1590) – This bill promotes the identification and determent of terrorist activity from reaching the homeland, and enhances the United States government’s ability to respond to terrorism, including emerging threats. Specifically, the legislation requires the Department of Homeland Security to develop and conduct exercises related to foreign terrorism, including the National Incident Management System, National Response Plan, and other related plans and strategies. The legislation was introduced on March 7 by Rep. Michael Guest (R-MS). The president signed the bill into law on Oct. 9.