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Tax Tip of the Week | No. 468 | New Tax Laws and Buying Your Dream Vacation Home July 12, 2018

Posted by bradstreetblogger in : Deductions, General, tax changes, Tax Planning Tips, Tax Tip, Taxes , add a comment

Tax Tip of the Week | July 11, 2018 | No. 468 | New Tax Laws and Buying Your Dream Vacation Home

Vacation-home buyers are impacted by the Tax Cuts and Jobs Act of 2017, passed by Congress in December of last year. Aside from a few exceptions the new laws are effective on January 1, 2018. The new laws that impact vacation homes generally revolve around the deductibility of mortgage interest and property taxes. This tax tip will not delve into any tax aspects of a second home rental.

Let’s chat first about the property taxes on your dream vacation home.
These property taxes are still deductible. But, like the property taxes on your personal residence there are now more hoops to jump through and they are higher. Being able to itemize now is more difficult since all of your taxes, a part of your itemized deductions, may not exceed $10,000.

Moving on to the deductibility of mortgage interest whether it be from home-equity loans, home-equity lines of credit (HELOCS) or second mortgages have also been adversely affected by the new tax laws.

Generally, mortgage interest is no longer deductible unless the loan proceeds are used to purchase, construct or significantly improve the home that secures the loan. Often, in the past, prior to the passage of the new tax laws – vacation-home buyers of ski chalets and oceanfront homes were using mortgages on their primary residence to purchase the second home. IRS now says that this interest is no longer deductible since the mortgage is on another home. However, it is okay to use a first mortgage on your vacation home for its purchase. But you must keep in mind that you can only deduct the interest on a grand total of $750,000 in mortgage loans. Any “excess” interest is not deductible.

First mortgages on your vacation home or on your primary residence will typically bear similar interest rates. However, unlike a HELOC on your primary residence used for the purchase of a vacation home, lending institutions will ask for at least a 15% down payment for mortgages placed on your vacation home. Be sure to factor this possibility into your cash planning forecast.

Of course, the best work around for managing the mortgage interest deduction on your dream home is not to have any debt. PAY CASH! NOW THAT WOULD BE A DREAM!

Credit given to Robyn A. Friedman, Wall Street Journal, Friday, May, 11, 2018

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 467 | Hmmm…Behind on Filing Your Income Tax Returns and/or Paying Your Income Taxes? July 4, 2018

Posted by bradstreetblogger in : General, Tax Deadlines, Tax Planning Tips, Tax Tip, Taxes, Uncategorized , add a comment

Tax Tip of the Week | July 4, 2018 | No. 467 | Hmmm…Behind on Filing Your Income Tax Returns and/or Paying Your Income Taxes?

You can run but you can’t hide. Delinquent tax return filing or failure to pay your income taxes is not a problem that ever goes away. In fact, the longer you wait to address this problem, the worse it becomes.

The highlights that follow are specific to the Internal Revenue Service. Other taxing entities have their own rules and regulations for past due returns and past due tax balances.

The “failure to file” IRS penalty is typically 5% per month and the “failure to pay” IRS penalty is an additional 5% per month. These two penalties may each be up to 25% of your unpaid taxes. To add insult to injury, interest expense to the IRS also accrues until the balance is paid in full.

The IRS may waive these penalties if you have reasonable cause for not filing your return or paying your taxes. Criminal charges may be sought against a taxpayer if the IRS believes you are evading taxes.

Some people won’t file a return with a balance due if funds are lacking to pay the IRS. In these cases, one may be in a better position to file the return without payment to avoid the “failure to file” penalty.  In this scenario, the “failure to pay” penalty would be the only penalty assessed, along with the interest expense of course.

If paying your return balance is not an option, an installment agreement may be applied for. If eligible, this agreement sets-up a monthly payment. Warning: These installment agreements are typically null and void if a payment is missed.

Another option, although far from easy to obtain, is to request an “offer in compromise.” This permits you to pay, under certain conditions, less then the full overdue balance.

Another possibility exists, if the IRS agrees you cannot pay your past due balance and your living expenses, your account may be moved to “currently not collectible.” Usually, in this situation, the IRS collection efforts will ratchet down. However, the debt remains with penalties and interest continuing to grow.

The moral of the story is not to ignore any IRS correspondence (or any tax correspondence for that matter) and be proactive in dealing with it. Your tax professional can help you come up with a workable plan. They have been down this road before and most likely will have a working rapport with the tax agency in question.

Credit to Sarah Skidmire Sell, The Associated Press, Sunday April 29, 2018, Dayton Daily News

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 466 | Gambling – Taxes Behind the Curtain June 27, 2018

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Tax Tip of the Week | June 27, 2018 | No. 466 | Gambling – Taxes Behind the Curtain

For federal income tax purposes, most people are aware that their gambling winnings may be offset dollar for dollar by their gambling losses. And, most people know their gambling losses may not exceed their gambling winnings. And, a few people even know that in order to deduct any gambling losses you must be able to itemize your deductions on your federal income tax return. So, if you are unable to itemize, your gambling losses are of no tax value – nada. Since the new law makes itemizing deductions even more difficult, fewer people will now be deducting their gambling losses.

Now that we have discussed the federal income tax effect of gambling, let’s switch it up and discuss Ohio, School District and your city income taxes (assuming you live in a taxable city and a taxable School District with an income tax). How do you offset your gambling income by your gambling losses in these other taxing entities? The answer is REALLY easy – YOU DON’T! Ohio, School Districts and any cities tax only your gambling winnings. No credit is allowed for your losses.

Example:  You decide to visit a casino and you get lucky and win $5,000 on your favorite slot machine on a small wager of $10. The casino operators will issue you a Form W-2G for the $5,000. And, usually at a minimum, withhold state and city income tax (if applicable). Okay, out of your $5,000 winnings, you now have about $4,700 after your $10 bet. Life is good! You are on a roll and you keep on betting. But the tides have turned and by the end of the day your winnings are all gone. Oh well! Other than an over-priced lunch at the casino, it has been a cheap day. You would have spent even more at the movies. WRONG!

Assuming you can not itemize and you live in a taxable city and School District, as many do. Your $5,000 of winnings, of which you have none left, may cost you depending upon your bracket, 40% of the $5,000, or $2,000 in tax. Yup, $2,000 for the money you no longer have. A movie would have been far cheaper! No wonder the State likes gambling. Unlike you, they can’t lose.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 465 | IRS Penalties – DON’T PAY Just Out of Frustration June 20, 2018

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Tax Tip of the Week | June 20, 2018 | No. 465 | IRS Penalties – DON’T PAY Just Out of Frustration

Is it a big-time hassle to deal with the IRS in any fashion? That is a big Y E S! In fact, it has never been more difficult. Maybe that is the IRS’s fault and perhaps it is the inevitable result of their budget being slashed. Regardless, attempting to communicate with them can make you crazy!

To give you some idea of the amount of civil penalties (via notices) assessed; in 2016, the IRS assessed 39.6 million taxpayers and abated 5.2 million of these. Considering the number of taxpayers in the USA, thusly, you have a relatively high chance of receiving a tax notice.

It is not uncommon for IRS notices to show balances due in the tens of thousands of dollars and to be very threatening. If you receive IRS correspondence – try not to overreact. Many people upon receiving IRS tax correspondence have a tendency to simply write them a check; they assume the IRS is always right. In fact, more than half of their notices are incorrect and only computer generated. Writing them a check without any further research probably makes sense if the IRS only wants a few bucks. Aside, from a few bucks being due, a quick telephone call to the IRS by your tax professional (not that the call hold time is quick) may be all that is necessary. Other times, a one-page letter to the IRS may be all that is needed to save the day and have the tax, interest and/or penalty abated. Other times, three or four letters, over an extended period of time, may be needed to receive a “yea” or “nay” to your request from the IRS. To avoid digging a deeper hole I would prefer that you do not call or correspond with the IRS on your own. A power of attorney is needed for your tax professional to have meaningful conversations and correspondence with the IRS.

One of the methods available for abatement includes the use of “administrative relief” under the “first-time penalty abatement policy.” The name “first time” is a misnomer, it doesn’t mean first time ever, just means you have been “clean” in the last three years… and yes, they do verify that.

Many other methods are available for potential abatement. But, remember, if your notice demands big dollars – get help.

Credit to… Tom Herman, Wall Street Journal “It May Pay to Fight IRS Penalties,” Monday, March 26, 2018

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

 

Tax Tip of the Week | No. 464 | Ohio’s Commercial Activity Tax (CAT) – General Information June 13, 2018

Posted by bradstreetblogger in : General, Tax Deadlines, Tax Tip, Taxes, Uncategorized , add a comment

Tax Tip of the Week | June 13, 2018 | No. 464 | Ohio’s Commercial Activity Tax (CAT) – General Information

The commercial activity tax (CAT) was enacted in Ohio House Bill 66 and first applied to taxable gross receipts received on and after July 1, 2005. The CAT is a successor tax to Ohio’s general business property and corporate franchise taxes, both of which were phased out. The CAT is an annual privilege tax measured by gross receipts on business activities in Ohio. This tax applies to all types of businesses: e.g., retailers, service providers (such as lawyers, accountants, and doctors), manufacturers, and other types of businesses including rentals. The CAT also applies whether the business is located in Ohio or is located outside of Ohio if the taxpayer has enough business contacts with this state. The CAT applies to all entities regardless of form, (e.g., sole proprietorships, partnerships, LLCs, and all types of corporations). A person with taxable gross receipts of more than $150,000 per calendar year is subject to this tax.

Taxable Gross Receipts – Gross receipts subject to CAT include most business types of receipts. Some examples of receipts that are not subject to the CAT include interest, dividends, capital gains, wages and gifts. Receipts from sales to out-of-state purchasers are not subject to the CAT.

Registration – Taxpayers having over $150,000 in gross receipts from sales to customers in Ohio for the calendar year are required to file returns for the CAT. In order to file returns, a taxpayer must first register for the CAT with the Ohio Department of Taxation.

Annual and Quarterly Filers – Annual CAT taxpayers (those taxpayers with taxable gross receipts between $150,000 and $1 million in a calendar year) must pay an annual minimum tax. The annual minimum tax is due on May 10th of the current tax year.

Taxpayers with annual taxable gross receipts in excess of $1 million must file returns on a quarterly basis. Quarterly taxpayers pay a rate component for taxable gross receipts in excess of $1 million. The annual minimum tax is paid with the filing of the first quarter return, which is due on May 10th.

Consolidated Elected Taxpayer Groups and Combined Taxpayer Groups – A consolidated elected taxpayer group is a taxpayer that has elected to file as a group including all entities that have either 50 percent or more common ownership or 80 percent or more common ownership. A major benefit of making this election is that receipts received between members of the group may be excluded from the taxable gross receipts of the group. This election is binding for eight calendar quarters.

Annual Minimum Tax –   The annual minimum tax is calculated as follows:
•    $150 for taxpayers with taxable gross receipts of $1 million or less in the previous calendar year;
•    $800 for taxpayers with taxable gross receipts between $1 million and $2 million;
•    $2,100 for taxpayers with taxable gross receipts between $2 million and $4 million; or
•    $2,600 for taxpayers with more than $4 million in taxable gross receipts in the previous calendar year.

Tax Credits – Some credits that taxpayers can claim against the CAT include:
•    the nonrefundable jobs retention credit;
•    the nonrefundable credit for qualified research expenses, or, the nonrefundable credit for a borrower’s qualified research and development loan payments;
•    the refundable motion picture production credit;
•    the refundable jobs creation credit, or the refundable job retention credit;
•    the Ohio historic preservation tax credit (on a temporary basis).

Some Issues We’ve Seen – From the beginning of enactment, and even through the present, many taxpayers are simply unaware that the tax exists, or that they are subject to it. Another issue is that some taxpayers file CAT returns that include all gross receipts and not just those to Ohio customers. And some do not take advantage of credits that can be applied to the tax. Also, we have seen many cases where the taxpayer computes the tax, then goes online and makes the payment, but never files the return. And, it usually takes Ohio over a year to send out a notice for the unfiled return, and by then, they have sent the taxpayer to collections, and filed liens. And finally, we have noticed that audits in this area are on the rise.

As you can see, this simple tax is not always so simple.

Note: most of this information is available on the Ohio Department of Taxation’s website.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Norman S. Hicks, CPA

–until next week.

Tax Tip of the Week | No. 463 | Employing Youth June 6, 2018

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Tax Tip of the Week | June 6, 2018 | No. 463 | Employing Youth

Each June, millions of youth begin their search for a summer job. Before hiring any summertime help, it’s a good idea to be aware of the Federal and State laws governing youth in the workplace. The Fair Labor Standards Act (FLSA) youth employment provisions are designed to protect young workers by limiting the types of jobs and the number of hours they may work, based on the age of the minor. The following provisions apply to nonagricultural occupations:

18 Years of Age. Once a youth reaches 18, the Federal child labor provisions no longer apply to them – they can work any job for any number of hours.

16 & 17 Years of Age. Under the FLSA 16 and 17-year-olds may work on any day for any number of hours. However, individual states may limit the hours or the times of day that anyone under the age of 18 may work. Also, all youth under the age of 18 are prohibited from working any non-farm jobs deemed hazardous.

14 & 15 Years of Age. 14 and 15-year-olds may work:

•    Non-school hours;
•    3 hours on a school day;
•    18 hours in a school week;
•    8 hours on non-school day;
•    40 hours in a non-school week; and
•    Between 7 a.m. to 7 p.m. (except June 1-Labor Day when hours are extended to 9 p.m.)

Full Credit to…Padgett Business Services June 2018 SmallBiz Builder

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 462 | The 10 Worst Corporate Accounting Scandals of all Time May 30, 2018

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Tax Tip of the Week | May 30, 2018 | No. 462 | The 10 Worst Corporate Accounting Scandals of all Time

Let’s take a break from the new tax law this week. Instead, let’s go back into the past and revisit some of the HUGE accounting scandals. For those who fail to learn from history are doomed to repeat it.

I have focused for the most part on only three facets of these scandals – 1) How they did it, (2) How they got caught, and 3) Fun facts. Not sure what the author defines as “Fun” fits my definition. The word ”Interesting” at least in my humble opinion may have been a better choice. I will let you be the final judge. The top 10 accounting scandals of the last twenty or so years follow:

Waste Management Scandal (1998)

•    How they did it:  The company allegedly falsely increased the depreciation time length for their property, plant and equipment on the balance sheets.
•    How they got caught: A new CEO and management team went through the books.
•    Fun fact:  After the scandal, new CEO A. Maurice Meyers set up an anonymous company hot-line where employees could report dishonest or improper behavior.

Enron Scandal (2001)

•    How they did it:  Kept huge debts off balance sheets.
•    How they got caught:  Turned in by internal whistle-blower Sherron Watkins; high stock prices fueled external suspicions.
•    Fun fact:  Fortune Magazine named Enron “America’s Most Innovative Company” 6 years in a row prior to the scandal.  (That is funny!)

WorldCom Scandal (2002)

•    How he did it:  Under-reported line costs by capitalizing rather than expensing and inflated revenues with fake accounting entries.
•    How he got caught:  WorldCom’s internal auditing department uncovered $3.8 billion of fraud.
•    Fun Fact:  Within weeks of the scandal, Congress passed the Sarbanes-Oxley Act, introducing the most sweeping set of new business regulations since the 1930s.

Tyco Scandal (2002)

•    How they did it:  Siphoned money through unapproved loans and fraudulent stock sales.  Money was smuggled out of company disguised as executive bonuses or benefits.
•    How they got caught:  SEC and Manhattan D.A. investigations uncovered questionable accounting practices, including large loans made to Kozlowski that were then forgiven.
•    Fun fact:  At the height of the scandal Kozlowski threw a $2 million birthday party for his wife on a Mediterranean island, complete with a Jimmy Buffet performance.

HealthSouth Scandal (2003)

•    How he did it:  Allegedly told underlings to make up numbers and transactions from 1996-2003.
•    How he got caught:  Sold $75 million in stock a day before the company posted a huge loss, triggering SEC suspicions.
•    Fun fact:  Scrushy now works as a motivational speaker and maintains his innocence.

Freddie Mac (2003)

•    How they did it:  Intentionally misstated and understated earnings on the books.
•    How they got caught:  An SEC investigation
•    Fun fact:  1 year later, the other federally backed mortgage financing company, Fannie Mae, was caught in an equally stunning accounting scandal.

American International Group (AIG) Scandal (2005)

•    How he did it:  Allegedly booked loans as revenue, steered clients to insurers with whom AIG had payoff agreements and told traders to inflate AIG stock price.
•    How he got caught:  SEC regulator investigations, possibly tipped off by a whistle-blower.
•    Fun fact:  After posting the largest quarterly corporate loss in history in 2008 ($61.7 billion) and getting bailed out with taxpayer dollars, AIG execs rewarded themselves with over $165 million in bonuses.

Lehman Brothers Scandal (2008)

•    How they did it:  Allegedly sold toxic assets to Cayman Island banks with the understanding that they would be bought back eventually. Created the impression Lehman had $50 billion more cash and $50 billion less in toxic assets than it really did.
•    How they got caught:  Went bankrupt.
•    Fun fact:  In 2007, Lehman Brothers was ranked the #1 “Most Admired Securities Firm” by Fortune Magazine.

Bernie Madoff Scandal (2008)

•    How they did it:  Investors were paid returns out of their own money or that of other investors rather than from profits.
•    How they got caught:  Madoff told his sons about his scheme and they reported him to the SEC.  He was arrested the next day. Penalties:  150 years in prison for Madoff + $170 billion restitution. Prison time for Friehling and DiPascalli.
•    Fun fact:  Madoff’s fraud was revealed just months after the 2008 U.S. financial collapse.

Satyam (2009)

•    How he did it:  Falsified revenues, margins and cash balances to the tune of 50 billion rupees.
•    How he got caught:  Admitted the fraud in a letter to the company’s board of directors.
•    Fun fact:  In 2011, Ramalinga Raju’s wife published a book of his existentialist, free-verse poetry. Raju and his brother charged with breach of trust, conspiracy, cheating and falsification of records. Released after the Central Bureau of Investigation failed to file charges on time.

Credit to CPAGold Newsletter/Blog by Richard Jorgesen May, 2018

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 461 | Who Gets the Biggest Breaks Under the New Tax Law? May 23, 2018

Posted by bradstreetblogger in : Deductions, General, tax changes, Tax Planning Tips, Tax Tip, Taxes, Uncategorized , add a comment

Tax Tip of the Week | May 23, 2018 | No. 461 | Who Gets the Biggest Breaks Under the New Tax Law?

The richest 1 percent of Americans (annual earnings of more than $732,800) will receive on average a tax savings of about $33,000. The poorest Americans (annual earnings of less than $25,000) will save on average a whopping $40. Yes! $40! Whopping! Dollars! Interesting to say the least!

Now, the good news is that the new personal income tax provisions will reduce taxes for more than 60% of all USA residents. However, the size of the tax savings by state and by taxable income is uneven as shown by the following chart:

Average Tax Savings

UNDER          $25,000 –     $48,000 –      $86,000 –
$25,000        $48,000        $86,000        $148,000

$40              $320              $780            $1,500

When considering all entity tax cuts including corporate income taxes, the richest Americans receive a combined savings of $51,140 while the poorest will save only $60.

Looking at the tax savings by state – how does Ohio fare?  Not that bad. For Ohioans, 69% of its taxpayers will realize savings. North Dakota is at the top of the savings list at 75%. New York, California and New Jersey are among the states with lowest savings.

Note: Please keep in mind that the federal income tax withheld on each of your 2018 paychecks will be calculated using the new withholding tables for 2018. As a result, your federal withholding should decrease at least some so that your tax savings from the new tax law will be received on each pay check as opposed to having a larger tax refund on your 2018 income tax return. I don’t want taxpayers who receive much of their income via a Form W-2 thinking that their new tax savings will be realized instead through a larger tax refund.

Credit given in part to Jeff Stein, Washington Post, published on Sunday, April 2, 2018 in the Dayton Daily News.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 460 | The Biggest Estate Plan Mistake – It’s Not What You Think May 16, 2018

Posted by bradstreetblogger in : General, Tax Planning Tips, Tax Tip, Taxes, Uncategorized , add a comment

Tax Tip of the Week | May 16, 2018 | No. 460 | The Biggest Estate Plan Mistake – It’s Not What You Think

Only about half of the adults aged 50 to 64 surveyed say they have a will that outlines how their monies and estate assets are to be divided following death. Only about two-thirds of those adults 65 and over say they have such paperwork. If you don’t have a valid will at death your assets will pass by what is known as “intestate succession” to your heirs according to state law. All fifty states have these statutes in place. So in summary, if you don’t have a will, the state will make one for you.

Ever hide some money and forget where you hid it? I have. It is such a pleasant surprise when I stumble across it. Presuming I ever do. Sure many people have wills drawn-up and some elaborate estate planning performed. However, if you are the only one who knows its whereabouts, is someone ever going to find it following your demise? Some people put these documents in a safe deposit box but never tell anyone where the key is. Or, your attorney has your will and estate planning in their vault. But, does anyone have a clue who your attorney is? If no one knows where your will is, then for all intents and purposes you do not have one; other than the one the state is going to do for you. I would be surprised if you like how the state distributes your assets.

Some financial persons advise putting together a two page or so letter along with a list as a hand-out for at least your immediate family and then review and discuss it with them. The letter will outline how the estate plan works and where your necessary documents are located. At the end of the day, your survivors will be more grateful than you know.

Credit given to Glen Ruffenach of the Wall Street Journal for some ideas, concepts and excerpts. (Monday, February 5, 2018)

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 459 | The New Tax Law and Your Charitable Deductions May 9, 2018

Posted by bradstreetblogger in : Deductions, General, tax changes, Tax Planning Tips, Tax Tip, Taxes, Uncategorized , add a comment

Tax Tip of the Week | May 9, 2018 | No. 459 | The New Tax Law and Your Charitable Deductions

Granted, for many people, the tax savings is not the number one driver for making charitable contributions, “but rather it’s your desire to impact the lives of others that motivates you to give.” However, having said that, it is always nice for Uncle Sam to give you an even bigger bang for the buck by granting you a tax deduction for your contributions. The resulting tax savings, effectively, helps you fund the contribution.

Much press has been devoted to the new tax law and its impact on your itemized tax deductions. Your charitable contributions are but one of your itemized deductions. And, to be able to “itemize”, you must exceed the standard deduction. Which is all well and fine but the new law increased the amount of the standard deduction. As a result, fewer people will be itemizing since the standard deduction will result in a greater benefit. If you use the standard deduction you will not receive any tax benefit for your charitable contributions. Currently about 30% of the United States itemizes when filing their taxes. Only about half of those will continue to itemize under the new tax law.

The Dayton Foundation, along with other organizations, has what is known as a Donor-Advised Fund or Charitable Checking Account (CCA). The idea behind these are to create the ability to “bundle your charitable giving by making large gifts into your fund or account in one year then dispersing grants to charity over a multi- year period. This allows you to take advantage of the charitable deduction in the year you itemize while taking the standard deductions in other years when you may not meet the threshold.” Please note that the “bundling” technique is not necessary if you have enough to itemize.

Other new changes include “an increase on the limitation of cash gifts to a charity from 50% of adjusted gross income to 60% as well as a doubling of the estate tax threshold.  One thing that hasn’t changed, however, is the IRA Charitable Rollover provision. Donors ages 70-1/2 or older should consider this tax-wise option first when making a charitable gift. These individuals can donate up to $100,000 annually from their IRA to any 501(c)(3) charitable organization without treating the distribution as taxable income.” In my opinion, this IRA Charitable Rollover provision is one of the more under-utilized provisions in the tax law.

Many other charitable and estate planning opportunities other than the ones above exist. Be sure to work hand in hand with your financial planner and your CPA to optimize the tax savings for yourself and to maximize the dollars that flow to the charitable organizations that you support.

Credit to Joseph Baldasare, MS, CFRE, Chief Development Officer of the Dayton Foundation for some ideas, concepts and excerpts from his article, How the New Tax legislation Could Affect your Charitable Deductions.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.