This is the eighth column in my series of tax updates to get my clients ready for their December Tax Planning Sessions. The One Big Beautiful Bill Act (OBBBA) changes discussed today include…
1 – The C Corporation Income Tax Rate And NOL Rules
Currently, the tax rate on C Corps at the Federal Level is a flat 21%. Illinois charges 9.5%. Net Operating Losses or NOL Carrybacks are prohibited. But the carryforward period is unlimited.
2 – Long-Term Capital Gains Tax Rates
There are two different sets of Cap Gains Tax Rates. First is for Short Term Cap Gains, or for an investment gain that was held for less than 12 months. All of these are taxed at regular income tax rates.
The tax rates on Long-Term Net Capital Gains and Qualified Dividends are generally unchanged. The breakpoints have been indexed for inflation.
Filing Status 0% 15% 20%
MFJ $0 – $96,700 $96,701 – $600,050 Over $600,050
HOH 0 –$64,750 $64,751 – $566,700 Over $566,700
MFS 0 –$48,350 $48,351 – 300,000 Over $300,000
All other Individuals 0 – 48,350 $48,351 – 533,400 Over $533,400
Estates and Trusts 0 – $3,250 $3,251 – 15,900 Over $15,900
Capital Losses are first matched against their mate in each category. In other words Long-Term Capital Losses are first matched against Long-Term Capital Gains. The same is true of Short-Term Losses and Gains.
Once used up in their individual categories, the losses can then cross over and negate income in the other category.
3 – The Alternative Minimum Tax for 1040’s
Back in the 70’s, Congress did a study on who was paying the most income tax. They found that upper-income individuals were paying less income tax, as a percentage of income, then their middle-class counterparts. As such, they then created the Alternative Minimum Tax.
This is nothing more than a surtax. The computer does your return, see’s how much tax you are paying, and if applicable, will just add on additional tax because you aren’t paying enough.
In tax circles this is what’s known as the “Bad Tax.” It’s a simple fact of life and there’s nothing that anyone can do about it.
Filing Status AMT Exemption Amount AMTI Phase Out Begins At
MFJ and Surviving Spouse $137,000 $1,252,700
Single and HOH 88,100 626,350
MFS 68,500 626,350
4 – Kiddie Tax
Kiddie tax rates have now been simplified by applying the ordinary and capital gains rates applicable to trusts and estates
5 – Alimony
TCJA permanently repeals the deduction for alimony and separate maintenance payments by the payor spouse and the inclusion in income by the recipient spouse for divorce or separation agreements executed after 12/31/2018.
Let me leave you with this…
As I continue to do tax planning with my clients, I try to get a sense of where this Holiday Season is headed. But this year there doesn’t seem to be a consensus. It depends on who you speak to.
While overall sentiment on Mainstreet seems to be down, some entrepreneurs are having a phenomenal year while others aren’t doing so great.
The numbers that came in from my November Financial Statements were very solid. And two weeks into December, that trend seems to be continuing.
Again, it depends on who you speak to, which is the best news I’ve heard in a long time.
We’re eight months past Liberation Day when the most substantial system of tariffs in recent history was imposed and our economy hasn’t recessed, unemployment is similar to where it was at the beginning of the year, and our Gross Domestic Product was just measured at 3.8%. Generally any figure not that far from a GDP of 3% is considered great.
Prices have certainly gone up and our dollar as measured against other currencies has weakened substantially. But in general, the financial statements I’m seeing don’t look terrible.
As a matter of fact, many look great, which is a testament to the resiliency of many entrepreneurs. When the world gives you lemons. make meringue.
Again, if you haven’t sent in your work through November, please do so today. I can’t do your tax planning if I don’t have an up-to-date set of financial statements.
And as always, if you’re having difficulties with your accounting or tax work, I’m waiting for your call.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.AccountingSolutionsLtd.com
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