- Pros and Cons of a Reverse Morris Trust
A Reverse Morris Trust is a financial strategy that allows a company to divest certain assets while minimizing tax implications. This arrangement involves merging a subsidiary with another company, enabling the original firm to distribute assets without triggering taxes on gains. Often used by large corporations aiming to offload underperforming or non-core assets, a Reverse… read more…
- What Are Back Taxes? Meaning and Consequences
Back taxes refer to unpaid taxes that remain outstanding from previous years, either due to missed payments, underreporting of income or adjustments in tax filings after an audit. These unpaid balances can accrue penalties and interest over time, which may significantly increase the amount owed. Individuals or businesses with back taxes may face consequences from… read more…
- Tax Forms W-8 vs. W-9: Differences and When to Use
IRS forms W-8 and W-9 serve distinct purposes in the tax system and are used by different groups to fulfill their tax obligations. A W-8 form is typically required from non-U.S. individuals or businesses to certify their foreign status and can enable filers to claim full or partial exemption from certain U.S. withholding taxes. In… read more…
- What Is Form W-8BEN for Individuals?
The W-8BEN form is an IRS document required for non-U.S. individuals who receive interest, dividends or other income from U.S. sources. The form, also known as the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting, enables nonresident aliens to confirm their foreign status to the tax collecting agency. It… read more…
- Itemized Deductions vs. Standard Deduction
Itemized deductions and the standard deduction are two options that taxpayers can choose when filing their tax returns. The choice affects how much taxable income is reduced, potentially influencing the amount of taxes owed. The standard deduction is a fixed dollar amount that varies based on factors like filing status, while itemized deductions allow for… read more…
- The Kiddie Tax: Rates, Limits and Rules for 2024 and 2025
The kiddie tax is a set of tax rules designed to prevent parents from reducing their tax burden by shifting investment income to their children. It applies to children under the age of 18, or dependent full-time students under 24, who have unearned income from investments, such as dividends or capital gains. The tax rate… read more…
- How to Fill Out Form W-8 BEN for Individuals
Foreign individuals use IRS Form W-8BEN to certify their non-U.S. status and claim benefits such as reduced withholding rates that may be available because of an income tax treaty. The form helps determine how much tax will be withheld on income from U.S. sources. To fill out a W-8BEN form, you’ll need basic information like… read more…
- I’m Selling My House and Netting $435,000. Do I Have to Worry About Capital Gains Taxes?
Profits from a home sale are subject to capital gains taxes. This sale will count toward your total capital gains for the year, and will be taxed at the normal rates of either 0%, 15% or 20%. That said, when it comes to home sales, the IRS allows you to exempt a portion of the… read more…
- Thinking of Investing Abroad? Compare Capital Gains Taxes Worldwide First
Currently, the top U.S. capital gains tax rate applied to assets held more a year is 20%. This is well below the world’s highest capital gains tax rate of 42% levied by Norway, but somewhat above the average of European countries. China’s maximum long-term capital gains tax on individuals is the same as the U.S… read more…
- How to Fill Out Form 8949 for the Sale of Capital Assets
Form 8949 is used to report the sale or exchange of capital assets, such as stocks, real estate, or cryptocurrencies to the IRS. It details the purchase and sale dates for each transaction, as well as the proceeds, cost basis and any adjustments. This information is then transferred to Schedule D, where gains or losses… read more…
- What Is a Liquidating Dividend and How Are They Taxed?
A liquidating dividend, unlike regular dividends that are paid from a company’s profits, is distributed from the company’s capital base during the process of winding down operations or liquidating assets. This dividend returns part of the investor’s original investment rather than a portion of earnings. Liquidating dividends are taxed differently from regular dividends, as they… read more…
- Nanny Tax: What It Is and How to Calculate It
Hiring a nanny can provide much-needed support for families, but it also comes with specific financial responsibilities. One of those responsibilities is the “nanny tax,” a federal requirement that applies to families who employ household workers, including nannies, caregivers and housekeepers. As of 2024, if you pay your household worker $2,700 or more in a… read more…
- I’m Earning $275k This Year. Can I Use a Backdoor Roth Strategy to Reduce Taxes?
If you’re making $275,000 a year, you can’t contribute to a Roth IRA due to income limits. However, a backdoor conversion can allow a high earner to sock away unlimited sums in a Roth account, enabling tax-free requirement withdrawals and a way past pesky required minimum distribution rules (RMDs) that many pretax retirement account require.… read more…
- I’m Selling My House and Netting $680k. Do I Have to Worry About Capital Gains Taxes?
A net gain on a home sale of $680k potentially could lead to having to pay capital gains taxes. But in many cases, you won’t have to pay taxes on the full amount of the gain. And you may be able to shield all of it. This is due to an exclusion that protects from… read more…
- What Is the Phantom Tax?
Phantom taxation occurs when individuals or businesses are required to pay taxes on income they haven’t actually received. Phantom income can arise with investments such as partnerships, real estate or mutual funds when taxable income is reported but not distributed to the taxpayer. Though the income is phantom, the tax liability is real and must… read more…
- IRS Collects $1.3 Billion From Wealthy Households Amid Crackdown: Are You Next?
The IRS has stepped up tax enforcement, and it has already collected more than $1.3 billion in unpaid taxes since fall, 2023. The IRS has begun catching up on a long backlog of what it calls “enforcement actions.” This is the agency’s process of review to determine if a taxpayer owes money and, if so,… read more…
- What Are Property Taxes and How Are They Calculated?
Property tax is a recurring levy imposed by local governments on property owners, based on the value of their real estate. Typically, property taxes are collected locally and fund local community services such as schools, roads, law enforcement and fire departments. The amount of the tax is usually determined by assessing the market value of… read more…
- Guide to Capital Gains Taxes on Commercial Properties
Capital gains tax on commercial property depends on several factors. Factors include how long the property was held and the taxpayer’s income level. When a commercial property is sold for more than its original cost basis, the profit, or capital gain, is subject to taxation. Knowing how these gains are calculated can help you identify… read more…
- Kamala Harris Supports Tax on Unrealized Capital Gains: What It Means for Wealthy Households
The Kamala Harris campaign has made one of its first concrete policy proposals this week with a tax plan. The centerpiece of the plan is a series of high-end tax increases on corporations and wealthy households worth approximately $5 trillion over 10 years. Specifically, Harris has proposed enacting the tax increases detailed in President Biden’s… read more…
- States With Tax Breaks for Renters: Do You Qualify?
It is rare to get meaningful tax relief as a renter. Homeowners can get significant tax advantages, most notably in the form of the mortgage interest deduction and the capital gains exemption, both of which are available to all households regardless of circumstance. This is less common for renters. There are no federal tax breaks for… read more…
- What to Know About Form 8889 for HSAs
If you’ve made contributions to or taken distributions from a health savings account (HSA), the IRS requires you to report it on your yearly taxes. That’s where Form 8889 comes in. It details contributions, distributions and potential tax deductions so you can report all HSA-related activities to remain compliant as well as optimize your tax… read more…
- What Is the 2025 Federal Solar Tax Credit?
The Federal Solar Tax Credit, also known as the Investment Tax Credit (ITC), provides an up to 30% tax credit for the costs of adopting solar energy in the United States. The credit applies to new solar photovoltaic (PV) systems and expansions of existing ones, reducing the overall installation cost by nearly a third. This… read more…
- How an Employee Stock Purchase Plan (ESPP) Is Taxed
One common question from employees with employee stock purchase plans is if there’s an employee stock purchase plan tax. While you’ll typically owe taxes based on the profits when you sell those shares later on, when and how much you’ll owe will be based on the specific nature of your plan. Under a qualified employee… read more…
- Are Employee Stock Purchase Plans (ESPP) Pre-Tax?
Employee stock purchase plans (ESPPs) are benefits offered by companies to help employees invest in company stock at a discount. These plans are designed to encourage ownership and align employee interests with those of the company. Understanding the tax treatment of ESPP contributions can help employees make the most of this benefit. Specifically, many may… read more…
- 4 Tax Benefits of Using an LLC for Your Rental Property
Forming a limited liability company (LLC) can be a smart move for real estate investors seeking both tax benefits and legal protection. LLCs offer pass-through taxation, allowing profits to flow directly to your personal tax return and potentially reducing your overall tax burden. Investors may also qualify for a special tax deduction available to LLCs.… read more…