Last Minute Tax Strategies Part 2 – Market Update 11/18/2022

This week is a continuation of last weeks Tax Saving Strategies Part 1. Always check with your CPA or tax professional who can explain these deductions and help you review their impact on your finances.

 

If you are a single-member LLC or sole proprietor filing Schedule C for your business, the day you charge a purchase to your business or personal credit card is the day you deduct the expense. Therefore, you should consider using your credit card for last-minute purchases of office supplies and other business necessities if you need the write-off this year.

 

If you operate your business as a corporation, and if the corporation has a credit card in the corporate name, the same rule applies: the date of charge is the date of deduction for the corporation.

 

But if you operate your business as a corporation and are the personal owner of the credit card the corporation must reimburse you if you want the corporation to realize the tax deduction, which happens on the reimbursement date. Submit your expense report and have your corporation make its reimbursements to you before midnight on December 31.

 

The lifetime learning credit is great if you want to further your education and training. This credit is worth up to $2,000 per year and helps pay for courses and educational expenses that improve your skills.

 

If your new or used vehicle has a gross weight greater than 6,000 pounds, then you can write off 100 percent of your business cost with bonus depreciation if you both buy it and drive it for at least one business mile on or before December 31, 2022, to ensure it meets the “placed in service” requirement.

 

This is the last year that 100% depreciation can be taken in the first year. For 2023 it will drop to 80%, 60% for property placed in service during 2024, 40% for property placed in service during 2025, and 20% for property placed in service during 2026.

 

Smaller vehicles that weigh under 6,000 pounds have a Section 179 deduction limit of $10,100 in the first year they are used and $18,100 with bonus depreciation. Here’s an article about the difference between Section 179 and bonus depreciation.

 

If you purchase a fully electric car or a plug-in hybrid electric vehicle, you may qualify for the maximum $7,500 credit that applies to both business and personal vehicles. You take this credit off the top, and depreciate or expense the remainder based on your business use percentage.

 

Both a corporation and proprietorship can benefit from hiring your child, but the proprietorship gets the biggest break because there are no payroll taxes when a child under age 18 is employed by his or her parent. If you have a child under the age of 18 and you operate your business as a Schedule C sole proprietor or as a spousal partnership, you should consider having that child on your payroll. First, neither you nor your child would pay payroll taxes on the child’s income and with a traditional IRA, the child can avoid all federal income taxes on up to $18,950 of earned income.

 

To avoid payroll taxes, the parent must pay the wages to the child on a W-2. If you use a Form 1099, your child pays self employment taxes on the 1099 income. Refer to our previous blog on hiring your child for more details.

 

Giving to charity is not only life-affirming, it can help with your tax bill. Under IRS rules, you can deduct charitable cash contributions of up to 60% of your adjusted gross income. Deductions for contributions of non-cash assets are capped at 30%. Consider bunching two years of contributions into 2022 if your total itemized deductions for 2022 are below the level of the standard deduction. In addition to achieving a large charitable impact in 2022, this strategy could produce a larger two-year deduction than two separate years of itemized deductions, depending on income level, tax filing status, and giving amounts each year. Check with your tax advisor if you’re unsure.

 

Donations of Goods: You can also deduct the fair market value of goods such as food, books and household items you donate to a qualified charity. You can also deduct actual, unreimbursed travel costs or 14 cents per mile you drive for charitable purposes.

 

I will be including more tips as we approach the end of 2022 but as you know, my expertise is in all things real estate. My best advice is to find someone you can trust to help you optimize your personal financial situation. It’s worth the investment!

 

We had 4 new condos and no new homes come onto the market this week. We currently have 34 active condos ranging from $325,000 to $2,995,000; the median condo price is $699,000. We currently have 40 active homes on the East Shore ranging from $1,025,000 to $64,500,000 with the median price of $3,270,000. Here’s a year-to-date local update:

 

Total Sales YTD:
Condos: 82 (↓12% YOY) | Homes: 82 (↓43% YOY)

 

The Median Sales Price:
Condos: $687,500 (↓2% YOY) | Homes: $1,560,000 (↑8% YOY)

 

Number of Sales Over $1 Million:
Condos: 17 = 20% (↑7% YOY) | Homes: 69 = 84% (↑9% YOY)

 

Highest Priced Sale:
Condos: $5,665,500 (↓5% YOY) | Homes: $32,000,000 (↓33% YOY)

 

Median Price Per Square Foot:
Condos: $595.68 (↑10% YOY) | Homes: $663.27 (↑9% YOY)

 

Median Days on the Market:
Condos: 78 (↑44% YOY) | Homes: 76 (↑12% YOY)

 

List to Sell Price:
Condos: 98% (↓2% YOY) | Homes: 95% (↓2% YOY)

 

Price Reductions this Week:
Condos: 0 | Homes: 0

 

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