and Losses: 10 Helpful Facts to Know +
Walk The Path To Tax Savings For 2015 +
5 Things To Know About Substantiating Donations
you sell a capital asset, the sale normally results in a
capital gain or loss.
A capital asset includes most
property you own for personal use or own as an investment.
Here are 10 facts that you should know about capital gains and
Capital Assets. Capital assets include property such as
your home or car, as well as investment property, such as
stocks and bonds.
Gains and Losses. A capital gain or loss is the
difference between your basis and the amount you get when you
sell an asset. Your basis is usually what you paid for the
Net Investment Income Tax. You must include all capital
gains in your income and you may be subject to the Net
Investment Income Tax if your income is above certain amounts.
The rate of this tax is 3.8 percent. For details, visit
Deductible Losses. You can deduct capital losses on
the sale of investment property. You cannot deduct losses on
the sale of property that you hold for personal use.
Limit on Losses. If your capital losses are more than your
capital gains, you can deduct the difference as a loss on your
tax return. This loss is limited to $3,000 per year, or $1,500
if you are married and file a separate return.
Carryover Losses. If your total net capital loss is
more than the limit you can deduct, you can carry it over to
next year's tax return.
Long and Short Term. Capital gains and losses are treated
as either long-term or short-term, depending on how long you
held the property. If you held it for one year or less, the
gain or loss is short-term.
Net Capital Gain. If your long-term gains are more
than your long-term losses, the difference between the two is
a net long-term capital gain. If your net long-term capital
gain is more than your net short-term capital loss, you have a
net capital gain.
Tax Rate. The tax rate on a net capital gain usually
depends on your income. The maximum tax rate on a net capital
gain is 20 percent. However, for most taxpayers a zero or 15
percent rate will apply. A 25 or 28 percent tax rate can also
apply to certain types of net capital gain.
Forms to File. You often will need to file Form
8949, Sales and Other Dispositions of Capital Assets, with
your federal tax return to report your gains and losses. You
also need to file Schedule D, Capital Gains and Losses, with
your tax return.
For more information about this topic, see the Schedule D
instructions and Publication 550, Investment Income and
Expenses. You can visit IRS.gov to view, download or print any
tax product you need right away.
Walk The Path To Tax Savings For 2015
Like many taxpayers, you may have been expecting to encounter a few
roadblocks while traversing your preferred tax-saving avenues.
If so, tax extenders legislation signed into law this past December may make
your journey a little easier. Let's walk through a few highlights of the
Protecting Americans from Tax Hikes Act of 2015 (the PATH Act).
Of interest to individuals
If you're a homeowner, the PATH Act allows you to treat qualified mortgage
insurance premiums as interest for purposes of the mortgage interest
deduction through 2016. However, this deduction is phased out for higher
income taxpayers. The law likewise extends through 2016 the exclusion from
gross income for mortgage loan forgiveness.
Those living in a state with low or no income taxes (or who make large
purchases, such as a car or boat) will be pleased that the itemized
deduction for state and local sales taxes, instead of state and local income
taxes, is now permanent. Your deduction can be determined easily by using an
IRS calculator and adding the tax you actually paid on certain major
Investors should note that the PATH Act makes permanent the exclusion of
100% of the gain on the sale of qualified small business stock acquired and
held for more than five years (if acquired after September 27, 2010). The
law also permanently extends the rule that eliminates qualified small
business stock gain as a preference item for alternative minimum tax (AMT)
Breaks for businesses
The PATH Act gives business owners much to think about as well. First,
there's the enhanced Section 179 expensing election. Now permanent (and
indexed for inflation beginning in 2016) is the ability for companies to
immediately deduct, rather than depreciate, up to $500,000 in qualified new
or used assets. The deduction phases out, dollar for dollar, to the extent
qualified asset purchases for the year exceeded $2 million.
The 50% bonus depreciation break is also back, albeit temporarily. It's
generally available for new (not used) tangible assets with a recovery
period of 20 years or less, and certain other assets. The 50% amount will
drop to 40% for 2018 and 30% for 2019, however.
In addition, the PATH Act addresses two important tax credits. First, the
research credit has been permanently extended, with some specialized
provisions for smaller businesses and start-ups. Second, the Work
Opportunity credit for employers that hire members of a "target group" has
been extended through 2019.
Does your company provide transit benefits? If so, note that the law makes
permanent equal limits for the amounts that can be excluded from an
employee's wages for income and payroll tax purposes for parking fringe
benefits and van-pooling / mass transit benefits.
Much, much more
Whether you're filing as an individual or on behalf of a business, the PATH
Act could have a substantial effect on your 2015 tax return. We've covered
only a few of its many provisions here. Please contact us to discuss these
and other provisions that may affect your situation.
Sidebar: Good news for generous IRA owners
The recent tax extenders law makes permanent the provision allowing
taxpayers age 70 1/2 or older to make direct contributions from their IRA to
qualified charities up to $100,000 per tax year. The transfer can count
toward the IRA owner's required minimum distribution. Many rules apply so,
if you're interested, let us help with this charitable giving opportunity.
5 Things To Know About
are virtually countless charitable organizations to which you might donate.
You may choose to give cash or to contribute noncash items such as books,
sporting goods, or computers or other tech gear. In either case, once you do
the good deed, you owe it to yourself to properly claim a tax deduction.
No matter what you donate, you'll need documentation. And precisely what
you'll need depends on the type and value of your donation. Here are five
things to know:
1. Cash contributions of less than $250 are the easiest to substantiate. A
canceled check or credit card statement is sufficient. Alternatively, you
can obtain a receipt from the recipient organization showing its name, as
well as the date, place and amount of the contribution. Bear in mind that
unsubstantiated contributions aren't deductible anymore. So you must have a
receipt or bank record.
2. Noncash donations of less than $250 require a bit more. You'll need a
receipt from the charity. Plus, you typically must estimate a reasonable
value for the donated item(s). Organizations that regularly accept noncash
donations typically will provide you a form for doing so. Keep in mind that,
for donations of clothing and household items to be deductible, the items
generally must be in at least good condition.
3. Bigger cash donations mean more paperwork. If you donate $250 or more in
cash, a canceled check or credit card statement won't be sufficient. You'll
need a contemporaneous written acknowledgment from the recipient
organization that meets IRS guidelines.
Among other things, a contemporaneous written acknowledgment must be
received on or before the earlier of the date you file your return for the
year in which you made the donation or the due date (including an extension)
for filing the return. In addition, it must include a disclosure of whether
the charity provided anything in exchange. If it did, the organization must
provide a description and good-faith estimate of the exchanged item or
service. You can deduct only the difference between the amount donated and
the value of the item or service.
4. Noncash donations valued at $250 or more and up to $5,000 require still
more. You must get a contemporaneous written acknowledgment plus written
evidence that supports the item's acquisition date, cost and fair market
value. The written acknowledgment also must include a description of the
5. Noncash donations valued at more than $5,000 are the most complicated.
Generally, both a contemporaneous written acknowledgment and a qualified
appraisal are required — unless the donation is publicly traded securities.
In some cases additional requirements might apply, so be sure to contact us
if you've made or are planning to make a substantial noncash donation. We
can verify the documentation of any type of donation, but contributions of
this size are particularly important to document properly.
Remember you can
call our offices if you have any questions about these or any
other accounting, tax, financial planning or insurance related
issues, at 313-388-0300 or our other area offices listed
Regards, Philip Schreiber, CPA
Schreiber Advisors, PC