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Tax Breaks for Family Caregivers: Are You Eligible?
Tax Breaks for Family Caregivers: Are You Eligible? 850 500 smolinlupinco

Caring for an elderly relative is a privilege that offers many rewards: a deeper bond with your loved one, the knowledge that you are making an impact, and the peace of mind knowing they are in good hands. There are also potential tax benefits that can help lighten the load of caregiving. 

1. Medical expenses. When you provide over 50% of your loved one’s support, including medical expenses, they qualify as your “medical dependent” on your tax return. This allows you to include their qualified medical expenses along with your own when you itemize, which can potentially lower your income. The test for determining whether an individual qualifies as your “medical dependent” is less stringent than that used to determine “dependents,” which is covered in more detail below. 

In order to claim medical expense deductions, the total costs must exceed 7.5% of your adjusted gross income (AGI). 

Deductible medical expenses include costs for qualified long-term care services required by a chronically ill individual. Eligible long-term care insurance premiums can also be deducted; however, there is an annual cap on the amount. The cap is based on age, and in 2024 goes from $470 for an individual aged 40 or less to $5,880 for an individual over 70.

2. Filing status. You may qualify for “head-of-household” status by virtue of the individual you’re caring for if you are not married and:

  • The person you’re caring for lives in your household,
  • You cover more than half the household costs,
  • The person qualifies as your “dependent,” and
  • The person is a relative.

If you are caring for your parent, they do not need to live with you. As long as you provide more than half of their household costs and they qualify as your dependent, you can claim head of household status which has a higher standard deduction and lower tax rates than a single filer.

While dependency exemptions are currently on hold for 2018 through 2025, the rules for determining who qualifies as a dependent still apply when determining eligibility for other tax benefits, like head-of-household filing status.

The following must be true for the tax year you are filing in order for for an individual to qualify as your “dependent”:

  • You provide more than 50% of their support costs,
  • They must either live with you or be related,
  • They must not have gross income in excess of an inflation-adjusted exemption amount,
  • They can’t file a joint return for the year, and
  • They are a U.S. citizen or a resident of the U.S., Canada or Mexico.

3. Dependent care credit. In cases where your loved one qualifies as your dependent, lives with you and is physically or mentally unable to take care of themselves, you may qualify for the dependent care credit. This credit is designed to account for costs incurred for their care necessary while you and your spouse go to work.

4. Nonchild dependent credit. For 2018 through 2025, the Tax Cuts and Jobs Act (TCJA) created a credit of up to $500 dependents who don’t qualify for the Child Tax Credit. This could apply to a dependent parent; however, they must pass the aforementioned gross income test to be classified as your dependent. You must also pay over half of your parent’s support.

If your adjusted gross income (AGI) is above $200,000 ($400,000 for a married couple filing jointly), this credit is reduced by $50 for every $1,000 that your AGI exceeds the threshold.

Contact your Smolin Advisor to explore the tax implications of financially supporting and caring for an elderly relative.

Planning For Foreign Assets in Your Estate
Planning For Foreign Assets in Your Estate 850 500 smolinlupinco

If you own foreign assets but haven’t included them in your estate plan, it’s time to revisit your plan. It’s possible to structure the ownership of your foreign assets according to the laws of the U.S. and the country where they’re located. But you probably should engage the help of an experienced estate planning advisor so you avoid these common issues.

The Burden of Double Taxation

U.S. citizens are subject to federal gift and estate taxes on all worldwide assets, regardless of where they live or the location of the assets. This means that If you own assets in other countries, you run the risk of double taxation if the assets are also subject to inheritance, estate, and other death taxes in those countries. 

A foreign death tax credit can help offset the US gift or estate tax; however, those aren’t necessarily available in all situations.  It’s possible that you might be able to get a foreign death tax credit which can lower your US estate and gift tax. But that is often dependent on tax treaties the other country has with the United States, and in some cases those credits aren’t available.

You are a U.S. citizen if:

  • You were born in the U.S., whether or not your parents were ever U.S. citizens and regardless of where you currently reside, unless you’ve renounced your citizenship, or
  • You were born outside the U.S. but at least one of your parents was a U.S. citizen at the time.

Even if you’re not a U.S. citizen, living inside the U.S. can make your worldwide assets subject to US gifts and estate taxes. This depends on the concept of “domicile”, meaning you have made the U.S. your home and plan to return there when you leave. When the U.S. is your domicile, their gift and estate taxes apply to your assets outside that country, even if you leave the country. Unless you take action to change your domicile, these taxes apply.

This may not be cause for concern. The U.S. gift and estate tax exemption amount is $13.61 million for the 2024 tax year. But remember, the exemption amount is scheduled to revert to its pre-2018 level of $5 million (indexed for inflation) as of 2026 unless an act of Congress extends it. 

Regardless, it’s best to plan for potential estate tax in the future. Additionally, married couples have different and potentially more complex rules. This is specifically true if one spouse is not a U.S. citizen nor considered a resident for estate tax purposes.

Plan to make two wills

If you want your foreign assets distributed exactly as you’d prefer, your will must be valid in both the U.S. and the other countries where assets are located. While it can be possible to prepare a single will that meets the requirements of each jurisdiction, it is still preferable to have separate wills for your foreign assets. If you opt to have a separate will, written in the foreign country’s language (if not English), it can help smooth the probate process.

Should you opt to prepare two or more wills, you should definitely work with local counsel in each foreign jurisdiction so you can be certain your wills meet each country’s requirements. If possible, it’s preferred that your U.S. and foreign advisors are able to coordinate to avoid any nullifying conflicts between the two wills. 

The bottom line is that if you own foreign assets, the wisest decision is to work with a Smolin advisor to ensure your wishes are executed in the most tax-efficient way possible. Reach out to a Smolin Advisor for support in all your estate planning needs. 

Is Switching to an S-Corp Right For You? A Tax Guide For Business Owners
Is Switching to an S-Corp Right For You? A Tax Guide For Business Owners 850 500 smolinlupinco

The type of business you run (sole proprietorship, partnership, limited liability company or LLC, C corporation, or S corporation) can greatly impact your tax bill. Choosing the right one is important from the get-go, but you can switch from one entity to the other if it makes sense to maximize your tax benefits.

For instance, S corporations commonly provide substantial tax benefits over C corporations; however, there is the potential for costly tax issues that should be considered before making a decision on whether or not to convert from a C corporation to an S corporation.

Here are four considerations to help guide your decision:

1. LIFO Inventory Tax: If your C corporation uses a last-in, first-out (LIFO) inventory method, converting to an S corporation can trigger a tax payment on benefits gained by using LIFO. While this tax can be paid over four years, you should weigh it against any potential tax gains you’ll receive by converting to S status.

2. Built-in Gains Tax: S corporations generally do not pay taxes on their profits. However, if your business was formerly a C corporation, you could be taxed on certain profits (like appreciated property) that were already owned before the switch. This tax applies if those assets were sold within five years of the switch to being an S corp. While this tax is a drawback, there are situations where the tax benefits of an S election outweigh this cost.

3. Passive Income: S corporations with a history as C corporations may face a special tax on passive investment income (such as dividends, interest, rents, royalties, and stock sale gains) that exceeds 25% of their overall income, and they carried over profits from their C corporation years. Owing this tax for three consecutive years can cancel the S corporation status! There are ways to avoid this tax, like distributing accumulated earnings and profits to shareholders or limiting passive income. 

4. Unused Losses: If your C corporation has accumulated losses, they cannot be used to offset the S corporation’s income, nor can they be passed through to shareholders. If the losses can’t be carried back to an earlier C corporation year, you need to weigh the cost of giving up the losses against the potential tax savings of becoming an S corporation.

Beyond Taxes: Other Considerations

These are just some of the factors to consider when switching from C to S status. For example, employee-owners of S corporations may not qualify for all the tax-free benefits available to C corporations. There can also be complications for shareholders who have outstanding loans from their qualified plans. These factors need to also be taken into account to have a clear picture of the implications when making your decision.If you’re considering changing your business structure, reach out to a Smolin Advisor. We can explain your options and potential strategies that can minimize your tax burden. 

Q3 Tax Deadlines for Businesses
Q3 Tax Deadlines for Businesses 850 500 smolinlupinco

Can you believe the third quarter is already here? We’ve compiled a list of key tax-related deadlines that might affect your business and employees to give you a leg up as we head into Q3. Keep in mind that this list isn’t all-inclusive and there could be other deadlines that apply to you. 

July 15

  • Employers with monthly tax deposit rules must submit Social Security, Medicare, and withheld income taxes along with nonpayroll withheld income taxes for June.

July 31

  • Report and pay second quarter taxes: Report income tax withholding and FICA taxes for employees paid in April, May, and June using Form 941. Be sure to pay any tax due by this date. (See the exception below, under “August 12.”)
  • File or request an extension for retirement plan report (if applicable): File your 2023 calendar-year retirement plan report using Form 5500 or Form 5500-EZ or request an extension.

August 12

  • Report income tax withholding and FICA taxes for second quarter 2024 using Form 941, if you deposited on time and in full all associated taxes due.

September 16

  • Calendar-year C corporation be sure to pay the third installment of 2024 estimated income taxes.
  • Calendar-year S corporation or partnership that filed an automatic six-month extension:
    • File a 2023 income tax return with Form 1120-S, Form 1065 or Form 1065-B and pay any tax, interest and penalties due.
    • Make contributions for 2023 to certain employer-sponsored retirement plans.
  • Employers should deposit Social Security, Medicare and withheld income taxes for August if monthly deposit rules are applicable. Include non-payroll withheld income tax for August if subject to monthly deposits.

Contact your Smolin Advisor to ensure you’re meeting all applicable deadlines and filing requirements.

hiring child for summer tax move

Is Hiring Your Child For the Summer a Smart Tax Move?
Is Hiring Your Child For the Summer a Smart Tax Move? 850 500 smolinlupinco

School’s out, and that can mean opportunities for your business. If you have a child interested in your work, consider hiring them for the summer.  Not only does it give your son or daughter a great experience, but you can both reap the tax benefits too! 

Benefits for Your Child

Depending on your business structure, your child might get special tax breaks come filing season. These entities include:  

  • Sole proprietorship,
  • Partnership owned by both spouses,
  • Single-member LLC that’s treated as a sole proprietorship for tax purposes, or
  • LLC that’s treated as a partnership owned by both spouses.

Hiring your child if you operate one of these types of businesses is a smart tax more because:

  1. Your child’s wages are not subject to Social Security, Medicare, or Federal unemployment (FUTA) tax until the employee-child reaches age 21, which means significant tax savings for your business.
  2. If your child is considered a dependent, their standard deduction for 2024 wages shields up to $14,600 from federal income tax. Depending on their rate of pay, this might mean a significant portion of their summer earnings won’t be taxed at all.

Benefits for Your Business

When hiring your child, you get a business tax deduction for employee wage expense and this deduction reduces your federal income tax bill, self-employment tax bill, as well as your state income tax bill (where applicable). 

It is important to note that there are different rules for corporations:

  • C and S corporations:  Your child’s wages are subject to Social Security, Medicare and FUTA taxes, like any other employee but you can deduct their wages as a business expense on your corporation’s tax return. In turn, your child can shelter the wages from federal income tax with the $14,600 standard deduction for single filers.

Traditional and Roth IRAs

Regardless of the type of business you operate, your child is eligible to contribute to an IRA or Roth IRA. For Roth IRAs, contributions are made with after-tax dollars meaning that taxes get paid upfront. For accounts that have been open for more than five years, the account owner, upon turning age 59½, can withdraw the contributions and earnings without paying federal income tax. 

Contributions to a traditional IRA, on the other hand, are deductible and subject to income limits. Deductible contributions to a traditional IRA lower the employee-child’s taxable income. 

As such, contributing to a Roth IRA is a better idea for a child than contributing to a traditional IRA. First, your child probably won’t get meaningful write-offs by contributing to a traditional IRA as their standard deduction shelters to $14,600 of 2024 earned income, and additional income will likely be taxed at very low rates.

A further benefit is that, your child can withdraw all or part of the annual Roth contributions for any reason without federal income tax or penalty. Of course, the best strategy is to leave as much of the Roth balance untouched until retirement so it can accumulate a larger tax-free amount.

The only tax law requirement for your child when making an annual Roth IRA contribution is having earned income for the year that at least equals what’s contributed for that year, regardless of age. For 2024, your child can contribute to an IRA or Roth IRA the lesser of their earned income or $7,000.

Even modest Roth contributions add up over time. If your child contributes $1,000 to a Roth IRA each year for four years, the account would be worth about $32,000 in 45 years –  assuming a 5% annual rate of return. If you assume an 8% return, the account would be worth more than three times that amount!

While hiring your child can be a tax-smart idea, you need to ensure that their wages are reasonable for the work performed. Be sure to maintain the same records as you would for any other employee to ensure the hours worked and duties performed by using timesheets, job descriptions and W-2 forms. 

Reach out to a Smolin Advisor with any questions you have about employing your child at your small business.

Boost Business Profits Cost Cutting Tips

Boost Business Profits with These 4 Cost-Cutting Tips
Boost Business Profits with These 4 Cost-Cutting Tips 1063 625 smolinlupinco

While it’s common for businesses to be most concerned with the volume of sales, this is not necessarily the only, nor most reliable, way to raise profits. In fact, the cost of making a sale can sometimes lead to lower than expected net profits. 

Business owners must consider their overall expenses, including cost per acquisition, as they aim to increase profits. Here are four areas to focus on when reviewing expenses and considering cost-cutting measures. 

1. Costs of Labor: Did you know that employee benefits like health insurance and retirement contributions account for nearly 30% of employee compensation? As you calculate your total labor costs, be sure to include these figures in addition to salaries and wages. 

While you want to be competitive in your total compensation and benefits packages, it’s also important to compare your offerings to those of similar roles in your industry. If your amounts are skewed higher or lower than other employers, you might want to reconsider your pay structure, salary amounts, or bonuses moving forward, at least in the short-term. If you need to reduce salaries or explore different benefit options to rein in spending, be mindful of how this can impact morale and turnover rates. It is wise to consider other ways to show appreciation for the value of your employees’ work, such as offering flexible work schedules or employee incentives to help them achieve their goals. 

2. Relationships with Vendors: Whether or not you are trying to cut costs, it’s generally a good idea to evaluate vendor contracts regularly to verify that each line item is still necessary for your business. Consider each vendor you work with (suppliers, cleaners, landscapers, technology firms, and other service providers) to ensure you aren’t duplicating services. You should also consider whether you are paying a vendor for work that could be reassigned to an existing employee’s workload. 

A final consideration is the potential to renegotiate vendor agreements and leases for property or equipment. It might be possible to work out a better deal, especially if you have a positive, long-standing relationship. If negotiations aren’t working, it might be time to research other options for those services. 

3. Efficacy of Advertising: Ad campaigns can be one of the biggest drains on your budget, especially if they are not effective with your target audience. Excessive spending on ineffective campaigns can be a huge drain on funds. If you’re seeing sluggish or stalled results, brainstorm with your advertising agency on ideas to boost your return on investment or ROI. It is also worth a look into other agencies that might be a better fit for your budget and goals. While fresh ideas from a new agency can increase sales, you should also talk openly with your current agency about how they can help before jumping ship.

4. Impacts of Interest: It’s common for businesses to borrow money for real estate, equipment, and operations, but these can carry a hidden, or often unconsidered, expense.  The hefty weight of interest can be a game-changer for business profitability, depending on rates. If rising commercial interest rates and the flux of variable-rate loans are draining your budget, it’s time to reconsider those lien-burdened operational expenses. Are they helping to generate more money than the cost of the interest? 

If not, you may need to brainstorm ways to lower your borrowing costs. This may mean switching to shorter-term or fixed-rate loan options or exploring ways to run your business more efficiently and, thus, operate with lower line credit. 

Even if your business isn’t experiencing profit pain points, it’s smart to implement a plan for continuous process improvement. Review your operations expenses and assess each cost’s ongoing need and reasonableness. 

If something is dragging your budget down, it might be time to cut that cost. However, remember each decision you make impacts other areas of your business and can even hinder productivity and growth. 

Reach out to a Smolin Advisor for support evaluating costs to ensure the overall health of your business. 

 

Turning Home Into Rental

What You Need to Know Before Turning Your Home Into a Rental
What You Need to Know Before Turning Your Home Into a Rental 850 500 smolinlupinco

A great option for homebuyers can be to live in their new home and then turn their old house into a rental. As of March 2024, the Zumper National Rent Report found that average monthly rents for one- and two-bedroom apartments rose from $1,487 to $1,847.

Of course, this varies depending on the part of the country you live in. The most expensive rental locations for a one-bedroom are:

  • New York City ($4,200)
  • Jersey City, New Jersey ($3,260)
  • San Francisco ($2,900)
  • Boston ($2,850)
  • Miami ($2,710)

The least expensive one-bedroom locations were:

  • Wichita, Kansas ($690)
  • Akron, Ohio ($760)
  • Shreveport, Louisiana ($770)
  • Lincoln, Nebraska ($840) 
  • Oklahoma City ($860)

Pros and cons of becoming a landlord

There are both risks and rewards for your finances and taxes when you’re a landlord. Once you begin renting your home, you’re considered a real estate landlord. You must report this income on your tax return, but can include deductions for money spent on:

  • Utilities
  • Operating expenses
  • Incidental repairs and maintenance (such as fixing a leaky roof)

Additionally, you can claim depreciation deductions for the home. And you can fully offset rental income with otherwise allowable landlord deductions.

Considering passive activity rules

According to passive activity loss (PAL) rules, you probably won’t be able to claim rent-related deductions that exceed your rental income (unless you qualify for an exception).  

Under the most widely applicable exception, the PAL rules won’t affect your converted property for a tax year in which:

  • Your adjusted gross income doesn’t exceed $100,000
  • You actively participate in running the home rental business
  • Your losses from all rental real estate activities in which you actively participate don’t exceed $25,000

Potential tax pitfalls from rental residences

Unless your rental is only temporary and made necessary by adverse market conditions, you could waive an important tax break for home sellers if you eventually sell your home at a profit. You can usually avoid tax on up to $250,000 ($500,000 for married couples filing jointly) of gain on the sale of your principal residence. 

It’s important to note that this tax-free treatment only applies when you’ve used the residence as your main residence for at least two of the five years preceding the sale. If you rent your home out for a long time, you may no longer qualify for this hefty tax break.

Limitations of the rental tax break

Even if you don’t rent out your home long enough to miss the principal residence exclusion, the tax break on the sale (the $250,000/$500,000 exclusion) won’t pertain to:

  • The extent of any depreciation allowable regarding the rental or business use of the home for periods after May 6, 1997, or
  • Any gain allocable to a period of nonqualified use (any period during which the property isn’t used as the principal residence of the taxpayer or the taxpayer’s spouse or former spouse) after December 31, 2008.

A maximum tax rate of 25% will apply to this gain (attributable to depreciation deductions).

Selling at a loss

If you bought a home when business was booming and ended up selling it at a loss, the loss is available for tax purposes only. However, you must establish that the home was converted permanently into income-producing property. 

This situation benefits from a longer lease period. However, if you find yourself in this conundrum, you know that you may not wind up with much of a loss for tax purposes. That’s because the basis (the cost for tax purposes) is equal to the lesser of the actual cost or the property’s fair market value when it’s converted to rental property. So if a home was purchased for $300,000, converted to a rental when it’s worth $250,000, and ultimately sold for $225,000, the loss would be only $25,000.

Have questions? Smolin can help.

It can be difficult to decide whether to turn your extra home into a rental property. Our experienced professionals can help you choose which option is best for your situation.

Tax Favored Retirement Plans

Tax-Favored Retirement Plan Options for Business Owners
Tax-Favored Retirement Plan Options for Business Owners 850 500 smolinlupinco

 

Does your business have a retirement plan? If not, it might be the right time to get one. Right now, retirement plan rules allow for significant tax-deductible contributions.

If you’re self-employed and set up a SEP-IRA, for example, you could contribute up to 20% of your self-employment earnings with a maximum contribution of $69,000. (That’s a $3,000 increase from 2023).

If you’re employed by your own corporation, you can contribute up to 35% of your salary to the account with a maximum contribution of $69,000. If your income falls within the 32% federal income tax bracket, making a maximum contribution could decrease what you owe for 2024 by a hefty $22,080 (32% x $69,000). 

Small business retirement plan options

You also have other small business retirement plan options to consider: 

  • 401(k) plans, which can even be set up for just one person (also called solo 401(k)s),
  • Defined benefit pension plans
  • SIMPLE-IRAs.

These plans may provide bigger or smaller deductible contributions than a SEP-IRA, depending on the circumstances. As an example, a participant can contribute $23,00

Depending on your situation, these plans may allow bigger or smaller deductible contributions than a SEP-IRA. For example, for 2024, a participant can contribute $23,000 to a 401(k) plan, plus a $7,500 “catch-up” contribution for those age 50 or older.

Deadlines to keep in mind for SIMPLE-IRA plans

After a change made by the 2019 SECURE Act, many tax-favored qualified employee retirement plans may be adopted by the due date of the employer’s federal income tax return for the adoption year. (This excludes SIMPLE-IRA plans.) Then, the plan can receive deductible employer contributions made by the due date (including any extension.) The employer may deduct them on the return of the adoption year.

It’s worth noting that this provision doesn’t change the deadline to establish a SIMPLE-IRA plan. That is still October 1 of the year for which the plan is to take effect. The change to the SECURE Act also doesn’t override rules that require certain plan provisions to be made during the plan year. (For example, provisions that cover employee elective deferral contributions under a 401K plan. Such employee elective deferral contributions can only be made if the plan is in existence prior.

If you extended your 2023 tax return, October 15, 2024, is the deadline for the 2023 tax year for setting up a SEP-IRA for a sole proprietorship business that uses the calendar year. In this case, October 15, 2024, is also the deadline for making a contribution for the 2023 tax year.

If you extend your 2024 tax return, the deadline for setting up a SEP and making a contribution for the 2024 tax year is October 15, 2025.

However, to make a SIMPLE-IRA contribution for the 2023 tax year, you must have set up the plan by October 1, 2023. So, it’s too late to set up a plan for last year.

Questions? Smolin can help

It’s possible to delay until next year to establish a tax-favored retirement plan for this year (with the exception of a SIMPLE-IRA plan). But why wait? 

Tackle it this year as part of your tax planning, and start saving for retirement. Your accountant can provide more information on small business retirement plan options. If your business has employees, be aware that you may have to make contributions for them, too.

Contact your Smolin accountant for more information.

Could a Contrary Approach with Income and Deductions Benefit Your Business Tax Rates

Could a Contrary Approach with Income and Deductions Benefit Your Business?
Could a Contrary Approach with Income and Deductions Benefit Your Business? 850 500 smolinlupinco

Businesses typically want to delay the recognition of taxable income into future years and accelerate deductions into the current year. But when is it wise to do the opposite? And why would you want to?

There are two main reasons why you might take this unusual approach: 

  • You anticipate tax law changes that raise tax rates. For example, the Biden administration has proposed raising the corporate federal income tax rate from a flat 21% to 28%. 
  • You expect your non-corporate pass-through entity business to pay taxes at higher rates in the future, and the pass-through income will be taxed on your personal return. Debates have also occurred in Washington about raising individual federal income tax rates.

Suppose you believe your business income could be subject to a tax rate increase. In that case, consider accelerating income recognition in the current tax year to benefit from the current lower tax rates. At the same time, you can postpone deductions until a later tax year when rates are higher, and the deductions will be more beneficial.

Reason #1: To fast-track income

Here are some options for those seeking to accelerate revenue recognition into the current tax year:

  • Sell your appreciated assets with capital gains in the current year, rather than waiting until a future year.
  • Review your company’s list of depreciable assets to see if any fully depreciated assets need replacing. If you sell fully depreciated assets, taxable gains will be triggered.
  • For installment sales of appreciated assets, opt out of installment sale treatment to recognize gain in the year of sale.
  • Instead of using a tax-deferred like-kind Section 1031 exchange, sell real estate in a taxable transaction.
  • Consider converting your S-corp into a partnership or an LLC treated as a partnership for tax purposes. This will trigger gains from the company’s appreciated assets because the conversion is treated as a taxable liquidation of the S-corp, giving the partnership an increased tax basis in the assets.
  • For construction companies previously exempt from the percentage-of-completion method of accounting for long-term contracts, consider using the percentage-of-completion method to recognize income sooner instead of the completed contract method, which defers recognition of income.

Reason #2: To postpone deductions

Here are some recommended actions for those who wish to postpone deductions into a higher-rate tax year, which will maximize their value:

  • Delay buying capital equipment and fixed assets, which would give rise to depreciation deductions.
  • Forego claiming first-year Section 179 deductions or bonus depreciation deductions on new depreciable assets—instead, depreciate the assets over several years.
  • Determine whether professional fees and employee salaries associated with a long-term project could be capitalized, spreading out the costs over time.
  • If allowed, put off inventory shrinkage or other write-downs until a year with a higher tax rate.
  • Delay any charitable contributions you wish to make into a year with a higher tax rate.
  • If permitted, delay accounts receivable charge-offs to a year with a higher tax rate.
  • Delay payment of liabilities for which the related deduction is based on when the amount is paid.
  • Buy bonds at a discount this year to increase interest income in future years.

Questions about tax strategy? Smolin can help.

Tax planning can seem complex, particularly when policy changes are on the horizon, but your business accountant can explain this and other strategies that could be beneficial for you. Contact us to discuss the best tax planning actions in light of your business’s unique tax situation.

21 Estate Planning Terms You Need to Know

21 Estate Planning Terms You Need to Know
21 Estate Planning Terms You Need to Know 850 500 smolinlupinco

Whether you’re making your first estate plan or need to update an existing one, it helps to speak the language. While most people are familiar with common terms like “trust” or “will,” the meanings of other estate planning terms may feel less clear. 

Keep this glossary of key terms handy to help you navigate the estate process with more confidence

  1. Administrator 

An individual or fiduciary appointed by a court to manage an estate if no executor or personal representative has been appointed or the appointee is unable or unwilling to serve.

  1. Ascertainable standard

This legal standard, typically relating to an individual’s health, education, maintenance, and support, is used to determine what distributions are permitted from a trust.

  1. Attorney-in-fact

The individual named under a power of attorney as the agent to handle the financial and/or health affairs of another person.

  1. Codicil 

A legally binding document that makes minor modifications to an existing will without requiring a complete rewrite of the document.

  1. Community property

A form of ownership in certain states in which property acquired during a marriage is presumed to be jointly owned regardless of who paid for it.

  1. Credit shelter trust

A type of trust established to bypass the surviving spouse’s estate to take full advantage of each spouse’s federal estate tax exemption. It’s also known as a bypass trust or A-B trust.

  1. Fiduciary

An individual or entity, such as an executor or trustee, who is designated to manage assets or funds for beneficiaries and is legally required to exercise an established standard of care.

  1. Grantor trust

A trust in which the grantor retains certain control so that it’s disregarded for income tax purposes and the trust’s assets are included in the grantor’s taxable estate.

  1. Inter vivos 

This is the legal phrase used to describe various actions (such as transfers to a trust) made by an individual during his or her lifetime.

  1. Intestacy

When a person dies without a legally valid will, a situation called “intestate,” the deceased’s estate is distributed in accordance with the applicable state’s intestacy laws.

  1. Joint tenancy

An ownership right in which two or more individuals (such as a married couple) own assets, often with rights of survivorship.

  1. No-contest clause

A provision in a will or trust that ensures that an individual who pursues a legal challenge to assets will forfeit his or her inheritance or interest.

  1. Pour-over will

A type of will that is used upon death to pass ownership of assets that weren’t transferred to a revocable trust.

  1. Power of appointment

The power granted to an individual under a trust that authorizes him or her to distribute assets on the termination of his or her interest in the trust or on certain other circumstances.

  1. Power of attorney (POA)

A legal document authorizing someone to act as attorney-in-fact for another person, relating to financial and/or health matters. A “durable” POA continues if the person is incapacitated.

  1. Probate

The legal process of settling an estate in which the validity of the will is proven, the deceased’s assets are identified and distributed, and debts and taxes are paid.

  1. Qualified disclaimer

The formal refusal by a beneficiary to accept an inheritance or gift or to allow the inheritance or gift to pass to the successor beneficiary.

  1. Qualified terminable interest property (QTIP)

Property in a trust or life estate that qualifies for the marital deduction because the surviving spouse is the sole beneficiary during his or her lifetime. The assets of the QTIP trust are therefore included in the estate of the surviving spouse, that is, the spouse who is the beneficiary of the trust, not the estate of the spouse who created the trust.

  1. Spendthrift clause

A clause in a will or trust restricting the ability of a beneficiary (such as a child under a specified age) to transfer or distribute assets.

  1. Tenancy by the entirety

An ownership right between two spouses in which property automatically passes to the surviving spouse on the death of the first spouse.

  1. Tenancy in common

An ownership right in which each person possesses rights and ownership of an undivided interest in the property.

Questions? Smolin can help. 

This brief roundup isn’t an extensive list of estate planning terms. If you have questions about these terms or others that aren’t listed here, reach out to us! We’re happy to provide additional context for any estate planning concepts you need more clarity on.

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