The Tax Professionals Blog
Taking Advantage of the Zero Tax on Long-Term Capital Gains
Posted by Lee Reams Sr. on
Taxpayers whose top marginal tax bracket is less than 25% enjoy a long-term capital gain tax rate of zero. As a result, the tax on any long-term capital gains within the 10% or 15% tax bracket is zero for these taxpayers. This provides an interesting strategy for lower income taxpayers or those whose income is abnormally low due to other reasons
Recaptured and Unrecaptured Real Estate Rental Section 1250 Gain
Posted by Lee Reams Sr., BSME, EA on
A frequent question we receive is the tax treatment of recaptured depreciation from the sale of real estate rental property. Gain from selling Sec 1250 property (real estate) is subject to recapture – the excess of the actual amount of depreciation previously claimed for the property over the amount of depreciation that would have been allowable under the straight-line method, limited to the gain on the sale, is taxed as ordinary income. However, this means that as long as the property is being depreciated using a straight-line method and held over a year, there is no Sec 1250 recapture but there will be “unrecaptured Sec 1250 gain,” which is taxed at a maximum rate of 25%.Tracing Rules That Apply For Deductibility Of Interest
Posted by Lee Reams Sr. on
One of the more complicated, misunderstood and often-violated tax issues is the interest tracing rules. Even though you can encounter some complicated situations, the tracing rules are generally summed up as follows:
The Tax Consequences of Return of Capital
Posted by Lee Reams Sr. on
Where a taxpayer receives payments for losses, damages, adjustment of purchase price, etc., for a capital asset (Sec 1221), those payments are not taxable to the extent the basis of the capital asset can be reduced (IRC Sec 1016(a)(1)). However the basis can only be reduced to zero and any amount in excess would represent a capital gain.
Using The Research Credit To Pay Payroll Taxes
Posted by Lee Reams Sr. on
A little known tax benefit for new qualified small businesses is the ability to apply a portion of its research credit, but no more than $250,000, to pay the employer’s share of the employees’ FICA withholding requirement (the 6.2 percent payroll tax). That can be quite a benefit, since in their early years, start-up companies generally do not have any taxable profits for the research credit to offset, and quite often it is the early years when there are expenditures that will qualify for the research credit. This can substantially help the cash flow for these young companies.