As the year winds down, charitable giving often takes center stage. While supporting your favorite causes is rewarding, it’s equally important to ensure your generosity qualifies for valuable tax deductions. Proper documentation is key, and the requirements depend on the type and size of your donation. Here’s a guide to substantiating your gifts: Cash Gifts Under $250: A canceled check, bank statement, credit card statement, or a receipt from the charity with its name, date, and gift amount suffices. $250 or More: Obtain a contemporaneous written acknowledgment from the charity stating the amount of the gift. Multiple smaller gifts to the same charity that total $250 or more still follow the rules for gifts under $250. Noncash Gifts Under $250: Keep a receipt with the charity’s name, date, location, and a description of the donation. $250 or More: The charity must provide a written acknowledgment with all the details required for cash gifts, plus a property description. Over $500: Retain additional records detailing how and when you acquired the property, your adjusted basis, and file Form 8283. Over $5,000 ($10,000 for closely held stock): Include a qualified appraisal and an appraisal summary signed by both the appraiser and the charity with your return. Publicly traded securities don’t require an appraisal. Over $500,000 ($20,000 for art): Submit the full signed appraisal with your return. Goods or Services Received in Exchange If the charity provides anything in return for your donation (e.g., a book, meal, or event ticket), request the fair market value of the item and subtract it from your deduction. While tax benefits may not drive your charitable giving, they can influence how much you can afford to donate. Document your gifts thoroughly to ensure you receive the deductions you deserve while supporting the causes you care about. Tax Planning Considerations of Gifting Most clients do not qualify to itemize their deductions due to the high standard deduction. Therefore, many clients cannot take advantage of the the charitable contribution deduction. However, if a client chooses to skip one year of charitable contributions and bundle two years together, their overall itemized deductions may be larger than the standard deduction. By implementing this strategy every other year, a client may maximize the benefit of charitable gifting. A second strategy for clients subject to RMD rules would be to utilize a Qualified Charitable Distribution (QCD) from their IRA, SIMPLE or SEP. This allows the Taxpayer to make their RMD directly to a charity without recognizing taxable income. This satisfies the RMD requirements and helps keep the Taxayer's AGI lower that may affect other phaseouts. Need assistance or have any questions on these tax implications? Contact our office for guidance: CLICK HERE or CALL (412)875-5719

The post-COVID-19 era has prompted many to reconsider where they call home. With remote work and early retirement becoming more common, some are exploring the possibility of converting a rental or vacation property into their primary residence. While this shift offers potential benefits, it also introduces complex tax implications. The Home Sale Exclusion Under Sec. 121 Taxpayers selling a primary residence may qualify for the Sec. 121 home sale exclusion, allowing them to exclude up to $250,000 ($500,000 for married couples filing jointly) of capital gains from taxable income. To qualify, they must have owned and used the property as their primary residence for at least two of the five years preceding the sale. However, this exclusion is limited when the property has periods of “nonqualified use,” such as when it served as a vacation home or rental property. Gains attributable to these periods are taxable. Example: A couple who converts their vacation home into a primary residence and later sells it will need to allocate gains between qualified use (as a primary residence) and nonqualified use (as a vacation home). This calculation ensures the exclusion applies only to the qualified portion. Rental Property Considerations When a rental property becomes a primary residence, tax complexities arise from prior use as an income-generating asset. Key factors include: Depreciation Recapture: Taxpayers must pay taxes on depreciation claimed during the rental period, taxed as ordinary income up to 25%. Passive Loss Carryforwards: Unused passive losses incurred during the rental period may remain suspended if the property’s sale qualifies partially under Sec. 121. Example: If a rental property with $50,000 in depreciation and $30,000 in passive loss carryforwards is converted and sold, the depreciation recapture and suspended losses may significantly impact the taxable gain. Transitioning Expenses and Deductions Converting a property to a primary residence changes deductible expenses. Expenses like repairs and insurance, previously deductible against rental income, become non-deductible. However, real estate taxes and mortgage interest may still be itemized deductions. Navigating the Web of Tax Implications Relocating to a former vacation or rental property involves meticulous tax planning. Taxpayers must understand the nuances of Sec. 121, maintain detailed records of property improvements, and consult professionals to mitigate tax liabilities. This transition, though complex, offers opportunities for tax savings with proper planning and professional guidance. Need assistance or have any questions on these tax implications? Contact our office for guidance: CLICK HERE or CALL (412)875-5719 Step-By-Step Guide to Rental/Vacation Home to Primary Residence Conversion Converting a rental or vacation home into your primary residence involves a mix of practical, legal, and financial considerations. Here’s a step-by-step guide to navigate the process: 1. Legal and Zoning Compliance Zoning Regulations: Check local zoning laws to ensure the property can be used as a primary residence. Some vacation properties may have restrictions. Homeowners Association (HOA) Rules: If the home is part of an HOA, confirm that living there full-time is permitted. 2. Financial Adjustments Mortgage Implications: Inform your lender if your mortgage was originally for an investment or secondary home. A primary residence typically qualifies for lower interest rates. Refinancing might be an option to take advantage of better rates. Tax Considerations: The property tax rate may change if it transitions to a primary residence. Rental income and deductions will no longer apply once it's your primary residence. Capital Gains Exemption: If you later sell the home, you may qualify for exclusions on capital gains (up to $250,000 for individuals, $500,000 for couples) if you’ve lived there for two out of the last five years. 3. Utilities and Infrastructure Ensure the property has year-round utilities and services such as heating, water, and reliable internet. Update your mailing address with the post office and all relevant entities. 4. Notify Authorities Update your driver's license and vehicle registration to reflect your new address. Change your voter registration. 5. Insurance Transition from rental or vacation property insurance to a primary homeowner’s insurance policy, which may have different coverage requirements. 6. Lifestyle Adjustments Consider proximity to work, schools, healthcare, and other amenities you rely on. Adjust any vacation-focused amenities to better suit everyday living. 7. Inform Tenants (if applicable) If the property is rented out, provide notice as required by your lease agreement and local laws.

Natural disasters have affected many Americans in 2024, causing widespread damage to homes and personal property. These losses, known as “personal casualty losses,” result from sudden, unexpected, or unusual events such as hurricanes, tornadoes, floods, earthquakes, fires, acts of vandalism, or terrorist attacks. However, not all personal casualty losses are eligible for a tax deduction. Eligibility for Deduction To deduct a casualty loss, you must meet two primary criteria: Itemized Deductions: You must itemize deductions on your tax return. Federally Declared Disaster: Through 2025, only losses resulting from federally declared disasters qualify for a deduction. Exception for Personal Casualty Gains There is an important exception to the federally declared disaster requirement. If you receive insurance proceeds that exceed the tax basis of your damaged or destroyed property, creating a personal casualty gain , you can deduct personal casualty losses unrelated to a federally declared disaster—but only up to the amount of your personal casualty gains. Filing for a Previous Year In some cases, taxpayers can deduct a casualty loss on the tax return for the year preceding the disaster. This allows you to claim a refund by filing an amended return if you’ve already submitted the relevant year’s tax return. Navigating Complex Rules Claiming a casualty loss deduction involves understanding nuanced tax rules and filing requirements. If you’re unsure about your eligibility or need assistance with amended returns, consult a tax professional to maximize your potential deductions. While natural disasters bring significant challenges, careful tax planning can help ease the financial burden and ensure you take advantage of available relief options.  Casualty losses for business related assets are different. Please contact your accountant to discuss the specifics of your situation. Need assistance? Contact our office for guidance: CLICK HERE or CALL (412)875-5719

UPCOMING TAX DEADLINES December 16 Calendar-year corporations : Pay the fourth installment of 2024 estimated income taxes, completing Form 1120-W for the corporation’s records. Employers : Deposit Social Security, Medicare and withheld income taxes for November if the monthly deposit rule applies. Employers : Deposit nonpayroll withheld income tax for November if the monthly deposit rule applies. December 31 Don't Miss This Important Deadline If you’re subject to required minimum distributions (RMDs), you must take your 2024 RMD by Dec. 31 to avoid penalties. RMDs are mandatory withdrawals from retirement plans such as 401(k)s, IRAs, SIMPLE IRAs and SEPs. Roth accounts aren’t subject to RMDs during the owners’ lifetimes. RMDs are taxable income subject to ordinary-income tax (not long-term capital gains) rates. Previous tax law required RMDs to begin at age 72 and imposed a penalty of 50% on missed withdrawals. The SECURE 2.0 Act raised the age to 73 and lowered the penalty to 25% (or 10% if corrected within two years). Younger taxpayers can be subject to RMDs if they inherited a retirement account. Contact our office as soon as possible for help calculating the correct amount for your RMDs. Here’s more from the IRS: IRS reminds those aged 73 and older to make required withdrawals from IRAs and retirement plans by Dec. 31; notes changes in the law for 2023 Internal Revenue Service January 10 Individuals : Report December 2024 tip income of $20 or more to employers (Form 4070). January 15 BOI (update) : Year-end tax planning reminder: Q4 estimates due.

If you pay premiums for Medicare health insurance, you may be eligible to claim them as an itemized deduction for medical expenses on your tax return. This can also include premiums for “Medigap” insurance and Medicare Advantage plans, which help cover costs that Medicare Parts A and B don't. To qualify, you generally need to itemize deductions, and your total medical expenses must exceed 7.5% of your adjusted gross income (AGI). However, if you're self-employed or a shareholder-employee of an S corporation, you may be eligible to claim an "above-the-line" deduction for your health insurance premiums, including Medicare. This option allows you to receive tax benefits without needing to itemize deductions. It's important to review your options carefully, as Medicare premiums may offer significant tax savings. Contact our office for guidance on claiming medical expense deductions and to develop a tax strategy that fits your individual situation: CLICK HERE or CALL (412)875-5719

In today’s challenging economic climate, businesses can benefit significantly from tax incentives and sales tax exemptions. However, many of these opportunities go unclaimed due to a lack of awareness or misconceptions about eligibility. Here are some key tax credits and exemptions that your business might qualify for: 1. Statutory Incentives Certain tax credits are available “as of right,” meaning that if your business meets the necessary criteria, you can claim them on a timely filed tax return without negotiation. These incentives are designed to encourage businesses to engage in specific activities or invest in economically distressed areas. Work Opportunity Tax Credit (WOTC): This federal credit ranges from $2,400 to $9,600 per eligible new hire from disadvantaged groups, such as veterans, welfare recipients, convicted felons, and workers with disabilities. To claim this credit, businesses must complete the necessary paperwork. Research and Development (R&D) Tax Credits: Both state and federal R&D credits may be available to businesses that invest in developing new products, improving processes, or developing internal-use software. The federal credit can be as high as 20% of qualified research expenses over a base amount. Even businesses with no tax liability can carry the credit forward, and start-ups can claim it against up to $500,000 in employer-paid payroll taxes. Empowerment Zone Incentives: Companies operating in federally designated “empowerment zones” can receive tax credits worth up to $3,000 for each eligible employee. Industry-Based and Investment Credits: Various states offer credits to attract certain types of industries, such as manufacturing or film production. Investment credits are also available for capital investments made within state borders. 2. Discretionary Incentives Discretionary tax incentives must be negotiated with government officials. These benefits are typically offered to businesses that promise to bring economic value to a state or locality, such as creating jobs or boosting revenue. Discretionary incentives might include income and payroll tax credits, property tax abatements, and even reductions in utility rates. 3. Sales Tax Exemptions In states with sales taxes, exemptions are often available for certain business purchases. Common examples include: Purchases by retailers for resale, Manufacturers buying equipment, raw materials, or components for use in the manufacturing process, Specific tax-exempt entities, and Agricultural businesses purchasing farming equipment, seeds, fuel, or chemical sprays. To take advantage of these exemptions, businesses may need to prove eligibility by providing resale or exemption certificates to sellers. Don’t Miss Out on These Opportunities Each year, numerous tax credits and incentives go unclaimed simply because businesses are unaware of them or mistakenly believe they’re not eligible. There are many more credits and exemptions available beyond the examples listed here. To ensure your business receives all the tax benefits it deserves, contact our office for guidance on claiming these valuable incentives and developing a tax strategy tailored to your business’s needs. CLICK HERE or CALL (412)875-5719

UPCOMING TAX DEADLINES September 16 Individuals : Pay the third installment of 2024 estimated taxes (Form 1040-ES), if not paying income tax through withholding or not paying sufficient income tax through withholding. Calendar-year corporations : Pay the third installment of 2024 estimated income taxes, completing Form 1120-W for the corporation’s records. Calendar-year S corporations : File a 2023 income tax return (Form 1120-S) and provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1 if an automatic six-month extension was filed. Pay any tax, interest and penalties due. Calendar-year S corporations : Make contributions for 2023 to certain employer-sponsored retirement plans if an automatic six-month extension was filed. Calendar-year partnerships : File a 2023 income tax return (Form 1065 or Form 1065-B) and provide each partner with a copy of Schedule K1 (Form 1065) or a substitute Schedule K1 if an automatic six-month extension was filed. Employers : Deposit Social Security, Medicare and withheld income taxes for August if the monthly deposit rule applies. Employers : Deposit nonpayroll withheld income tax for August if the monthly deposit rule applies. September 30 Calendar-year trusts and estates : File a 2023 income tax return (Form 1041) if an automatic five-and-a-half-month extension was filed. Pay any tax, interest and penalties due. October 10 Individuals : Report September tip income of $20 or more to employers (Form 4070). October 15 Individuals : The last day to file an extended 2023 tax return and pay any tax, interest, or penalties due.

As the summer season approaches, it's the perfect time to not only soak up the sun but also to ensure your finances are in check. Here are 10 budgeting tips designed to help you make the most of your summer while staying on track with your financial goals and objectives. Budget for Vacations: Plan your summer vacations in advance and budget accordingly. Allocate funds for transportation, accommodation, meals, and activities. Consider using travel rewards or loyalty points to offset costs. Book time during shoulder seasons. Save on Energy Costs: As temperatures rise, energy bills can increase. Take steps to save on energy costs by using fans instead of air conditioning, investing in energy-efficient appliances, and turning off lights and electronics when not in use. Plan Affordable Activities: Enjoy the summer without overspending by seeking out free or low-cost activities in your area, such as outdoor concerts, picnics in the park, hiking trails, or visiting local museums and attractions on discounted days. Maximize Outdoor Entertaining: Host budget-friendly gatherings with friends and family by organizing outdoor picnics, barbecues, or potluck dinners. Pool resources, share responsibilities, and enjoy the company without breaking the bank. Review Insurance Coverage: Take time to review your insurance policies, including homeowners, renters, auto, and travel insurance. Ensure you have adequate coverage for summer activities, such as water sports or road trips, and explore opportunities to save on premiums. Summer Job Opportunities: Consider taking on seasonal or part-time employment during the summer months to supplement your income. Look for opportunities in industries such as hospitality, tourism, landscaping, or event planning. Stay on Top of Financial Goals: Use the summer as an opportunity to revisit your financial goals and track your progress. Adjust your budget, savings contributions, and investment strategies as needed to stay on target. Utilize Seasonal Sales: Take advantage of summer sales and promotions to purchase items you need at discounted prices, such as outdoor furniture, sporting equipment, or clothing for the upcoming school year. Plan for Back-to-School Expenses: Start planning and budgeting for back-to-school expenses, including supplies, clothing, and extracurricular activities. Look for sales, coupons, and second-hand options to save on costs. Review Your Investment Portfolio: Use the summer months to review your investment portfolio and rebalance if necessary. Consider any life changes or market developments that may impact your investment strategy and make adjustments accordingly.

There are some important upcoming changes that might affect your financial planning. There's a big shift happening regarding estate and gift taxes, and it's something that needs to be considered sooner rather than later. Starting in 2026, there will be a significant decrease in the estate and gift tax basic exclusion, essentially cutting it in half. This means that if you're thinking about transferring ownership of your assets, now might be the time to do it. While some are hoping Congress will extend the doubled exclusion, realistically, this might not happen. Waiting until the last minute could leave you scrambling, both mentally and legally. Setting up trusts and transferring assets takes time, and affected clients will want to avoid any last-minute rush. Currently, the exclusion stands at $13,610,000, but after January 1, 2026, it drops to around $7 million. That's a significant change that could affect your estate planning and potential tax liabilities. By taking action now, you could potentially save a substantial amount in estate taxes. When we talk about transferring assets, it's essential to understand the implications. Transferring assets during your lifetime means the recipient inherits your basis, while holding onto them until death allows for a basis step-up for your heirs. This difference could influence your decision-making process. At Stevans & Associates, we want to make sure you have all the information you need to make these decisions. That's why it's crucial to start planning now and not wait until the last minute. Let's work together to evaluate your estate planning situation and determine the best course of action for you and your family. Please get in touch with a tax planner at our office to discuss the best options for your situation: (412)875-5719 Many other tax laws are anticipated to change after December 31, 2025 that may affect you. We will highlight each of these changes in future articles.