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Tax Law

How has the capital gains tax changed, and how does it affect me?

By Tax Law

In the Tax Cuts and Jobs Act of 2017 signed into federal law in December, the American tax code underwent many changes. However, the capital gains tax structure has, for the most part, stayed the same.

Short-term capital gains, on assets held for a year or under, maintain their taxing status as ordinary income. Long-term capital gains, for assets held for more than a year, maintain their status as taxed based on tax bracket: 0%, 15%, or 20%.

The biggest difference to note here is that the income thresholds for many tax brackets have been raised; thus, the marginal tax rates have been lowered, and in general, this has resulted in short-term capital gains tax cuts.

October 4, 2018
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Tax Cuts and Jobs Act of 2017: LLC, Partnerships, S Corps, and Sole Proprietors

By Tax Law

The recent Tax Cuts and Jobs Act brought with it many changes to federal tax law. In this series of blog posts, we explore what’s new in taxes.

            There is now a 20% deduction for this “pass-through” income. However, for professional services providers like lawyers, doctors, and accounts, only the first $157,000 is deductible for single filers (and only the first $315,000 for joint filers). It is important to note that the 20% deduction does not apply to passive investments in LLCs, Partnerships, and S Corps.

            Attorney Fred Jacobs of Bach, Jacobs & Byrne, P.A. is a Florida Board Certified Tax Law attorney who can advise you throughout the tax planning process. Call (941) 906-1231 to set up a consultation to review your situation.

October 2, 2018
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What is the gift tax?

By Tax Law

As defined by the Internal Revenue Service, the gift tax is one, “…on the transfer of property by one individual to another while receiving nothing, or less than full value, in return.” In general, it is said that all gifts are taxable – however, there are some exceptions to this rule. The following gifts are considered non-taxable:

-Any that are not more than the annual exclusion for the calendar year ($15,000 per gift, at the time of this writing)

-Tuition or medical expenses paid on behalf of someone else

-Gifts to one’s spouse

-Gifts to a political organization

-Gifts to charitable organizations

The recent Tax Cuts and Jobs Act of 2017 raised the annual exclusion from $14,000 to $15,000 per gift, which benefits high-net-worth individuals who wish to make gifts to their heirs.

Beware of this, however: on December 31, 2025, the exemptions will revert to lower values, absent any tax law updates in the meantime. Plan and give accordingly!

August 7, 2018
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In 2018, Floridians will vote on whether to raise the Homestead Exemption

By Asset Protection Planning, Real Estate, Tax Law

As of May 2017, the Florida Senate has voted to put a proposal on next year’s ballot that will increase the Florida homestead property tax exemption from its current value of $50,000 to a value of $75,000. This exemption applies to homesteads worth $100,000 or more and this new bill will give Florida voters the opportunity to lower property taxes. According to estimates regarding the effect of this legislation, it has the potential to save 4.3 million Florida residents a total of $644 million and the average home owner would save approximately $170 annually.

If 60% of voters approve this legislation, this new exemption rate will take effect on the first of January in 2019. Though this bill has its fair share of opponents and supporters, it will now be up to Florida voters to decide if cutting property taxes is the right decision for the state.

June 26, 2018
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What is the Florida Homestead Exemption?

By Asset Protection Planning, Real Estate, Tax Law

The Florida homestead exemption is an asset protection tool implemented to protect homestead property. Your Florida homestead will be designated to procure certain exemptions from real estate taxes.

In order for you home to be considered your “homestead” in Florida, you must have a legal title to the home, the home must be your permanent residence and you must apply for the homestead exemption at the property appraiser’s office in the county where your home is located. A second home or property cannot be considered a homestead in Florida and properties that are titled in the name of irrevocable trusts, limited liability corporation companies, corporations or partnerships are also unable to qualify as homestead properties. However, property owned by a living trust or a land trust may qualify as homestead property in certain situations.

Currently, the Florida homestead exemption reduces the value of a home for assessment of property taxes by $50,000 for homes that are worth $100,000 or more. This means that, if a home is worth $100,000, it will be taxed as if it is only worth $50,000.

June 22, 2018
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What is a Roth IRA?

By Asset Protection Planning, Tax Law

A Roth IRA is a retirement savings account that is funded with earnings that have already been taxed. The earnings placed in a Roth IRA are, therefore, allowed to grow without being taxed further. This type of account allows an individual to set aside a specified amount of their after-tax income each year, while keeping it from being taxed further while it remains in the account. Additionally, when these funds are withdrawn upon retirement, you do not have to pay any taxes. You can contribute to a Roth IRA at any age, as long as you have earned income from a job. It makes the most sense to open a Roth IRA if you expect your tax rate to be higher by the time you retire than it is currently. The attorneys at Bach & Jacobs, P.A. have been trained with regard to the transfer of retirement accounts at death and can advise you about this, both in planning your estate and administering a probate or trust after the account holder has died.

June 12, 2018
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What is a Qualified Domestic Trust (QDOT)?

By Asset Protection Planning, Estate Planning, Tax Law

A qualified domestic trust (QDOT) is a marital trust utilized for the benefit of a spouse that is not a U.S. citizen. This type of trust allows a non-U.S. citizen who is married to a U.S. citizen to qualify for the unlimited marital deduction, which keeps the estate from being subject to federal income taxes upon the death of the first spouse. Without a QDOT, these estate taxes would have to be paid at the first death. With a QDOT, however, the taxes are delayed until the surviving spouse passes. This is an estate planning tool implemented to allow the assets within the trust to provide for the non-citizen spouse after the citizen-spouse has passed away, without being heavily taxed first. If you are married to a non-U.S. citizen, Bach & Jacobs, P.A. attorneys can discuss a QDOT with you as part of your estate planning.

June 8, 2018
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How to Obtain “Uncollectible” Status if you Owe Back Taxes

By Tax Law

As a senior citizen, it can be difficult to pay normal living expenses each month. If you also have past-due taxes that you cannot afford, they become a constant worry and hindrance. However, there are ways to help resolve this issue. The IRS is able to designate your account as “Currently Not Collectible” (CNC) if you have a low-income. As long as you have CNC status, you do not have to pay your past-due income taxes for the periods described below, as applicable, but you will still be able to remain current in tax compliance. Once you obtain CNC status, it will be maintained for at least one year. However, if you are a retiree, it is very possible that your status will be labeled as “indefinite”, since it is likely that your income will remain constant.  If you have an extremely low income, being granted CNC status could be as simple as calling the number on the IRS collection notice and asking an IRS collector to file form 53 (this form can only be filed by an IRS official). If you do this, you will not need to file an excessive amount of paperwork. However, you may have to complete IRS form 433-A. This form demonstrates that you don’t have a high enough surplus of income, after paying living expenses, to pay your taxes. If you aren’t sure whether or not you qualify for uncollectible status, the IRS website has articles that include the national standards for items such as food, clothing, transportation, housing and utility expenses.

If you need further assistance with any tax matters, our attorney Frederic C. Jacobs is Florida Board Certified in Tax Law and is happy to help. To contact our offices, please call: 941-906-1231.

August 22, 2017
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Estate Planning for Same-Sex Couples in Florida: Tax Filing

By Asset Protection Planning, Estate Planning, Tax Law

Because same-sex married couples are now federally recognized, they can file joint tax returns. The  IRS also recognizes federal tax provisions which include income tax credit, child tax credit, and employee benefits.

Spousal exclusion now applies to same-sex couples, which permits partners to leave property to the surviving spouse without having to pay estate taxes when the first spouse passes away.

The 2015 ruling, Obergefell v. Hodges, also made amends to states’ intestacy statutes. Now if a same-sex spouse dies without making a will, the surviving same-sex spouse will inherit some of the assets of the deceased spouse and receive other benefits formerly only available to heterosexual couples such as homestead protection.

April 28, 2017
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Estate Planning for Same-Sex Couples in Florida

By Asset Protection Planning, Estate Planning, Government Benefits, Tax Law

 The U.S. Supreme Court rulings in the 2013 Windsor v. U.S. and the 2015 Obergefell v. Hodges cases resulted in changes for same-sex couples in areas such as estate planning and tax filing.

It is important that same-sex couples living in Florida take the proper steps in their estate planning, and specify key details that will ensure their protection under the law.  Such planning may include creating estate planning documents such as a last will and testament, or Revocable Trust, durable power of attorney, living will, and a designation of pre-need guardian.

April 7, 2017
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