While the government remains in a period of unstable transition and the world in a continued moment of pause, tax advisors face the challenge of how to help clients prepare and plan for 2021. Luckily, DSJ’s got you covered.
FOR INDIVIDUALS FILING SEPARATELY OR JOINTLY:
1. Know your tax bracket
According to an interview from Accounting Today: “Establishing tax brackets is the first step in determining the most appropriate strategies, such as accelerating deductions, deferring income, and harvesting long-term capital gains under the [Net Investment Income Tax] threshold.”
2. Do a financial check-up
Where do you stand with your tax payments? What is the status of your investments? What is the remaining term of your mortgage? Consider a professional tax advisor like ours to help overview your finances and get everything in check before the 2020 filing season.
FOR BUSINESSES AND BUSINESS OWNERS:
1. Look into loan options
Small businesses heading into 2021 with outstanding debts and continued financial burdens should strongly consider the range of loan options available for COVID-19 relief. The Payroll Protection Program is being revived for first and second-time borrowers. Additionally, the SBA’s Economic Injury Disaster Loan (EIDL) is also available for small businesses facing economic hardships.
2. See if you qualify for a QBI Deduction
The Qualified Business Income allows up to 20% deducibility on the net amount of qualified items of income, gain, deduction, and loss. QBI also allows businesses to deduct 20% of qualified real estate investment trust dividends and qualified publicly traded partnership income.
3. Write-off expenses with the bonus first-year depreciation
A 100% bonus first-year depreciation is available to all new businesses that purchase used equipment and machinery. The 100% write-off is available even if such assets are only used for a small portion of the 2020 fiscal year.
FOR BOTH:
1. Look into election impacts of taxes
While the current tax code has yet to change, President-Elect Joe Biden has presented new ideas on tax reform that could take place within the coming months as he transitions into office. What changes can we expect? To start, Biden has promised to immediately repeal Trump’s payroll tax cut; other overhauls will likely follow in stride. Staying up to date with DSJ’s news and COVID-19 updates is your best bet as tax-related changes take place in the new year.
2. Capital gain assets
Depending on your taxable income, long-term capital gain (profits from sold assets) that are held for a year or longer can be taxed as low as 0% with a high of 20%. Those with long-held assets from earlier in 2020 can benefit from the 0% tax rate by selling such assets yielding a capital loss after the ball drops for 2021.
Call our office at 516-541-6549 or visit our website for more Coronavirus news and to learn how we can help you prepare for the 2020 tax season.
Sincerely,
Devin McQuillan
Associate, Creative Solutions
Contact:
516-541-6549 | Email