CPA Blog

Putting your home on the market? Understand the tax consequences of a sale

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Published: Friday, 01 July 2016 10:21

Written by Phillip Strickler, CPA.CITP

As the school year draws to a close and the days lengthen, you may be one of the many homeowners who are getting ready to put their home on the market. After all, in many locales, summer is the best time of year to sell a home. But it’s important to think not only about the potential profit (or loss) from a sale, but also about the tax consequences.

Gains

If you’re selling your principal residence, you can exclude up to $250,000 ($500,000 for joint filers) of gain — as long as you meet certain tests. Gain that qualifies for exclusion also is excluded from the 3.8% net investment income tax.

To support an accurate tax basis, be sure to maintain thorough records, including information on your original cost and subsequent improvements, reduced by any casualty losses and depreciation claimed based on business use. Keep in mind that gain that’s allocable to a period of “nonqualified” use generally isn’t excludable.

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Choosing a funding method for your buy-sell agreement

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Published: Thursday, 30 June 2016 09:38

Written by Phillip Strickler, CPA.CITP

Anyone who owns a closely held business with at least one other partner needs to take certain steps to guard against business disruption. If one partner departs suddenly, or becomes disabled or dies, serious confusion and conflicts can ensue. Among the most important steps is to create a buy-sell agreement, which stipulates precisely how ownership interests will be valued and purchased.

2 ways to pay

In most situations, payouts for a buy-sell agreement are funded with a cash-value life insurance policy or a disability buyout insurance policy. There are two main types of life insurance-funded buy-sell agreements:

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Combine business travel and a family vacation without losing tax benefits

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Published: Friday, 10 June 2016 11:14

Written by Phillip Strickler, CPA.CITP

Are you thinking about turning a business trip into a family vacation this summer? This can be a great way to fund a portion of your vacation costs. But if you’re not careful, you could lose the tax benefits of business travel.

Reasonable and necessary

Generally, if the primary purpose of your trip is business, expenses directly attributable to business will be deductible (or excludable from your taxable income if your employer is paying the expenses or reimbursing you through an accountable plan). Reasonable and necessary travel expenses generally include:

• Air, taxi and rail fares,
• Baggage handling,
• Car use or rental,
• Lodging,
• Meals, and
• Tips.

Expenses associated with taking extra days for sightseeing, relaxation or other personal activities generally aren’t deductible. Nor is the cost of your spouse or children traveling with you.

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How many employees does your business have for ACA purposes?

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Published: Friday, 03 June 2016 10:57

Written by Phillip Strickler, CPA.CITP

It seems like a simple question: How many full-time workers does your business employ? But, when it comes to the Affordable Care Act (ACA), the answer can be complicated.

The number of workers you employ determines whether your organization is an applicable large employer (ALE). Just because your business isn’t an ALE one year doesn’t mean it won’t be the next year.

50 is the magic number

Your business is an ALE if you had an average of 50 or more full time employees — including full-time equivalent employees — during the prior calendar year. Therefore, you’ll count the number of full time employees you have during 2016 to determine if you’re an ALE for 2017.

Under the law, an ALE:

• Is subject to the employer shared responsibility provisions with their potential penalties, and
• Must comply with certain information reporting requirements.

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