Maintaining Financial Health in Unhealthy Times
This year’s tax guide provides a wealth of information regarding tax planning and strategies for the highly uncertain times we are facing. Each section assesses the overall landscape and provides helpful tips and considerations. The guide offers practical summaries of legislative and regulatory changes – including particularly the ongoing impact of the Tax Cuts and Jobs Act of 2017 (TCJA) and special provisions enacted this year in the face of COVID-19.
As usual, the tax guide was prepared by a trusted third-party provider and is intended to offer food for thought. Your AKM CPA can help you evaluate your own circumstances and consider your best strategic options. Please also note the special service packages we have assembled to help our clients – both business and individual – in the face of unprecedented challenges.
Contents of the 2020-2021 Tax Planning Guide
Income and deductions: Control the Timing of Income and Deductions to Your Tax Advantage [Page 2] – An overview of tax on ordinary income and the still-unfolding impact of the Tax Cuts and Jobs Act of 2107, as well as a discussion of the reduced likelihood of being subject to the alternative minimum tax, along with income timing strategies. Helpful summaries:
- Chart: 2020 standard deductions
- Chart: Itemized deductions also deductible for AMT purposes
- Feature: COVID-19 Payroll tax relief for the self-employed
- Case study: Factor state and local tax deduction limits into timing strategies.
Executive Compensation: Smart Tax Planning for Your Exec Comp Package is Critical [Page 6] – Strategies for crafting a tax-efficient total compensation package, including restricted stocks, RSUs, incentive stock options, nonqualified options and NQDCs. Helpful summary:
- Case study: Stock-based compensation and TCJA tax deferral
Investing: Uncertainty Further Complicates Tax Planning for Investments [Page 8] – A detailed summary of tax considerations when buying and selling investments. Helpful summaries:
- Chart: Maximum capital gains tax rates
- Case study: Using capital losses to absorb unrecognized gains
- Case study: how to qualify for the 0% capital gains rate
- Case study: Can you deduct investment interest expense?
Real Estate: Make the Most of Tax Breaks for Your Home and Other Real Estate [Page 12] – Overview of strategies for maximizing tax benefits of owning a principal residence, vacation home or rental property. Helpful summary:
- Feature: CARES Act OIP correction
- Feature: CARES Act and temporary easing of TCJA interest deduction rules
Business ownership: Don’t Forget About Tomorrow While Addressing Today’s Challenges [Page 14] – A discussion of the challenges business owners face in balancing the business’ income, expenses and tax breaks with plans for their individual financial futures. Helpful summaries:
- Feature: CARES Act help for struggling businesses
- Chart: Comparison of contribution limits of profit-sharing plan vs SEP
Charitable giving: Donations May Be More Impactful This Year – To You and the Recipients [Page 16] – A discussion of how to leverage the flexibility of charitable contributions in your tax planning, particularly in light of the deductibility limit increase incorporated into COVID-19 legislation. Helpful summaries:
- Chart: Deductibility of specific types of donations
- Feature: CARES Act boost tax benefits of charitable giving
Family and education: Focusing in on Children’s Financial Future [Page 18] – An overview of how families can put the younger generations on a sound financial footing. Helpful summary:
- Case study: Roth IRAs as tax smart investments for teens
Retirement: Leverage the Might of Tax-Advantaged Retirement Plans and Avoid Tax Traps [Page 20] – A summary of tax advantages associated with various types of retirement plans and additional considerations in light of COVID-19 changes. Helpful summaries:
- Chart: Retirement plan contribution limits
- Feature: CARES Act retirement plan relief
- Feature: SECURE Act changes and their impact
Estate planning: Taking the Right Steps Now Can Save Taxes Later [Page 22] – Overview of the favorable tax environment and potential pitfalls. Helpful summaries:
- Chart: Transfer tax exemptions and rates
- Case study: Taking advantage of valuation discounts
Tax rates [Page 24] – 2020 individual, corporate and trusts and estates income tax rate schedules.