How will I be taxed on the money from the sale of my house?

There is a good chance you will pay 0% in taxes on the sale of your home. The tax code has a provision for the sale of your primary residence where you can shield profit from taxation, called the primary residence exclusion. If you have been living in the house for at least the past two years, you can qualify to avoid taxation on the profit from your home, up to a total of $250,000 if you are single or $500,000 if you are married.

You may not be able to avoid all taxes
You only pay taxes on profit
You may owe no taxes

Does my business need a Consumer's Use Tax Account?

It sounds like you’re state requires service-only businesses to track and collect use taxes. As a result, you’ll likely need to get a Consumer’s Use Tax Account in your state. This is going to be very state specific so it might be worth talking with your CPA or finding one who is familiar with business taxation in your state.

Business AdvisingJoshua Escalante Troesh, CFPJune 15, 2021Tax PlanningComment

How can I reduce the amount of my taxable income?

You seem to be doing well overall with your financial strategy, so the focus will be on optimizing what you are already doing. The following are a few of the most common practices for reducing your income, although I'd need to understand more about your actual situation to be able to guide you in the right direction. I have also included the approximate amount you could reduce your taxable income by with each strategy.

CONTRIBUTE MORE TO YOUR WORKPLACE PLAN
SEE IF YOU HAVE A 457 PLAN
CONTRIBUTE TO HEALTH ACCOUNTS
SEEK A COMPREHENSIVE FINANCIAL PLANNER

Tax PlanningJoshua Escalante Troesh, CFPJune 1, 2021Tax Withholdings, Tax Planning

How Do I Change Tax Withholdings Without Exemptions

The newest IRS Form W-4 provides a new process to accomplish the same goal as exemptions did in the past. In fact, the new form more clearly connects setting your withholdings with the process you will use in April to fill out Form 1040 and file your taxes.

ALSO COVERED:

Filling out the form
Getting to an exact withholding number
Getting payroll estimates from HR

How will a 401(k) withdrawal impact my taxes at year-end?

Assuming the withdrawal is going to be spent and not rolled over to another retirement account, a partial withdrawal from your Traditional 401(k) will be treated as taxable income when you file your taxes next year. The amount the 401(k) provider deducts and sends to the IRS will also be counted as a prepayment of your taxes for the year, similar to how withholdings worked while working. . . .

How do I file an amended return with form 1040X?

The IRS provides directions for filing a 1040X on their website, although as with all things IRS they aren't always the easiest to follow. I highly recommend engaging a qualified tax professional, such as a CPA, to assist you with your taxes. Additionally, since you have a significant underpayment of taxes for the prior year, you will want to have professional guidance to minimize penalties (the IRS doesn't generally lower interest charges).

Article Also Covers:

Hiring a CPA is Cheap
Volunteer Income Tax Assistance Program
Minimizing Multi-Decade Taxes

Is it worth paying points to buy down the mortgage interest rate?

If you keep the mortgage for 30 years it is generally worth it, but almost no one does this for either their home or investment property. If you sell the property in 3 months it doesn’t make sense to pay $10k in points to get a $170 monthly savings. The question is: How long do you need to have the mortgage to make paying that fee (the points) worth it - considering the time-value of money?

Article Also Covers:

How to calcluate the net present value of the bank’s offers
How banks calculate their offers
Estimating how long will you keep the mortgage
The rate of return on alternative uses for the funds
Multi-decade tax planning and mortgage points

When can we claim expenditures for rehabbing our rental property?

Are other tax deductions still possible if you take the Standard Deduction?

Taking the Standard Deduction does not eliminate all other deductions, but it does eliminate many of the most talked about deductions. The Standard Deduction can be take instead of taking Itemized Deductions from Schedule A, but there are plenty of other deductions and tax credits which are available.

How is the profit from the sale of our home taxed during a divorce?

There are a few questions imbedded in your bigger question, so I'll be taking them one at a time. Before starting, however, you will likely benefit from talking with a financial professional, at least CPA for doing your taxes this year. To answer your main question, assuming the property was never depreciated as an investment property, your share of the capital gains will be taxed at long-term capital gains rates. This should be a tax of 15% of the capital gain above the exclusion amount.

Is interest on a HELOC still deductible under the new tax law?

Based on what you have stated, your interest should still be deductible under the new tax law. Whether second mortgage interest is deductible is highly dependent on your individual circumstances, and many are confused by the new rules (as they are honestly quite confusing). You will want to . . . .

Should we pay off our mortgage when on fixed income pensions?

I generally don't advise clients to aggressively pay down their mortgage unless they have so much money in retirement assets and income that the mortgage money won't make a difference to them. Unlike what many might suggest, your mortgage does not present a risk to you and your wife during retirement. So long as you can afford to pay your monthly payment and . . . .

How the New Tax Law Impacts Individuals & Families

Although the tax reform was pitched as a simplification of the tax code, the nearly seven-hundred page Tax Cuts and Jobs Act do little to simplify the number of pages in the tax code. You, however, will probably see much simpler taxes in the coming years because the vast majority of taxpayers will no longer need to itemize deductions.

Tax PlanningJoshua Escalante Troesh, CFPApril 1, 2018Tax Planning