Eakes & Company, CPA's

Are you age 70½ or older and want to give to charity? You can make cash donations directly from your IRA to IRS-approved charities free of federal income tax. These are called qualified charitable distributions (QCDs). In contrast, other traditional IRA distributions are wholly or partially taxable. Unlike regular charitable donations, you can’t claim itemized deductions for QCDs. But they aren’t included in your adjusted gross income (AGI). That lowers the odds that you’ll be affected by unfavorable AGI-based rules or hit with the 3.8% net investment income tax. The annual QCD limit is now adjusted for inflation. In 2024, the limit is $105,000. In 2025, it will increase to $108,000.

Are you age 70½ or older and want to give to charity? You can make cash donations directly from your IRA to IRS-approved charities free of federal income tax. These are called qualified charitable distributions (QCDs). In contrast, other traditional IRA distributions are wholly or partially taxable. Unlike regular charitable donations, you can’t claim itemized deductions for QCDs. But they aren’t included in your adjusted gross income (AGI). That lowers the odds that you’ll be affected by unfavorable AGI-based rules or hit with the 3.8% net investment income tax. The annual QCD limit is now adjusted for inflation. In 2024, the limit is $105,000. In 2025, it will increase to $108,000.

Employee stock options are a potentially valuable asset for employees who receive them. If you’re one of them, you’ll eventually sell shares acquired by exercising nonqualified stock options (NQSOs), hopefully for a nice profit. Your objectives should be to 1) have most or all of the profit taxed at lower long-term capital gain rates and 2) postpone paying taxes for as long as possible. When exercising NQSOs, the “bargain element” (difference between market value and exercise price) is treated as ordinary compensation income. Therefore, it’s subject to federal income tax and payroll tax withholding. You want to unlock the best possible tax results, and we can help with advance planning.

The Inflation Reduction Act created several tax credits to promote clean energy. You may want to take advantage of them before it’s too late. President-Elect Donald Trump has pledged to “terminate” the law so it may be repealed in 2025. For example, there’s an Energy Efficient Home Improvement Credit. It covers 30% of the cost of eligible improvements, such as installing energy-efficient windows, doors, and insulation, up to $1,200 a year. There’s also a credit of up to $2,000 for qualified heat pumps, water heaters and biomass stoves or boilers. And there’s a credit for 30% of the cost of installing solar panels. Contact us before making a large purchase to check if it’s eligible.

Hiring a nanny, housekeeper or gardener can significantly ease the burden of childcare and daily chores. However, as a household employer, it’s critical to understand your “nanny tax” obligations. Hiring a household worker who isn’t an independent contractor may make you liable for federal income tax, Social Security and Medicare (FICA) tax, federal unemployment tax and possibly state tax. In 2024, you must withhold and pay FICA taxes if your worker earns $2,700 or more (increasing to $2,800 in 2025). You pay household worker taxes by increasing your quarterly estimated tax payments or withholding from wages. Employment taxes are then reported on your tax return. Contact us with questions.

Hiring a nanny, housekeeper or gardener can significantly ease the burden of childcare and daily chores. However, as a household employer, it’s critical to understand your “nanny tax” obligations. Hiring a household worker who isn’t an independent contractor may make you liable for federal income tax, Social Security and Medicare (FICA) tax, federal unemployment tax and possibly state tax. In 2024, you must withhold and pay FICA taxes if your worker earns $2,700 or more (increasing to $2,800 in 2025). You pay household worker taxes by increasing your quarterly estimated tax payments or withholding from wages. Employment taxes are then reported on your tax return. Contact us with questions.

Hiring a nanny, housekeeper or gardener can significantly ease the burden of childcare and daily chores. However, as a household employer, it’s critical to understand your “nanny tax” obligations. Hiring a household worker who isn’t an independent contractor may make you liable for federal income tax, Social Security and Medicare (FICA) tax, federal unemployment tax and possibly state tax. In 2024, you must withhold and pay FICA taxes if your worker earns $2,700 or more (increasing to $2,800 in 2025). You pay household worker taxes by increasing your quarterly estimated tax payments or withholding from wages. Employment taxes are then reported on your tax return. Contact us with questions.

Employee stock options are a potentially valuable asset for employees who receive them. If you’re one of them, you’ll eventually sell shares acquired by exercising nonqualified stock options (NQSOs), hopefully for a nice profit. Your objectives should be to 1) have most or all of the profit taxed at lower long-term capital gain rates and 2) postpone paying taxes for as long as possible. When exercising NQSOs, the “bargain element” (difference between market value and exercise price) is treated as ordinary compensation income. Therefore, it’s subject to federal income tax and payroll tax withholding. You want to unlock the best possible tax results, and we can help with advance planning.

Employee stock options are a potentially valuable asset for employees who receive them. If you’re one of them, you’ll eventually sell shares acquired by exercising nonqualified stock options (NQSOs), hopefully for a nice profit. Your objectives should be to 1) have most or all of the profit taxed at lower long-term capital gain rates and 2) postpone paying taxes for as long as possible. When exercising NQSOs, the “bargain element” (difference between market value and exercise price) is treated as ordinary compensation income. Therefore, it’s subject to federal income tax and payroll tax withholding. You want to unlock the best possible tax results, and we can help with advance planning.

Employee stock options are a potentially valuable asset for employees who receive them. If you’re one of them, you’ll eventually sell shares acquired by exercising nonqualified stock options (NQSOs), hopefully for a nice profit. Your objectives should be to 1) have most or all of the profit taxed at lower long-term capital gain rates and 2) postpone paying taxes for as long as possible. When exercising NQSOs, the “bargain element” (difference between market value and exercise price) is treated as ordinary compensation income. Therefore, it’s subject to federal income tax and payroll tax withholding. You want to unlock the best possible tax results, and we can help with advance planning.