Posts Tagged ‘Tax Services’

Employee Spotlight: Philip Jackson

Not to be confused as the former professional basketball coach, Philip Jackson is a new Manager in our firm’s Tax Services department. He is also a CPA with more than 20 years of experience in public accounting in assisting businesses, individuals and not-for-profits through tax consulting and compliance services. A University of Indianapolis graduate with a bachelor’s degree in accounting, Philip enjoys explaining tax considerations and options to keep clients informed of current and potential tax regulations. This allows him to proactively provide knowledge and expertise from a tax planning perspective.

Having experience with clients in a wide variety of industries and sizes allows Philip to focus on a business’s specific needs and tailor the various solutions accordingly. This industry experience includes manufacturing, real estate, professional services and healthcare, to name just a few. Philip also has experience and interest working with technology companies and startups to provide business entity selection considerations and financial guidance.

As Chairman of the Indiana CPA Society’s Tax Resource Advisory Council and member of the Indiana Commissioner’s Tax Advisory Council, Philip works with federal and state taxing authorities as an advocate for clients and the public regarding various tax matters. In addition, he contributes his time as the leader of the All Pro Dad’s program for a community school, founded by former Indianapolis Colts head coach, Tony Dungy.

Philip’s wife is a fourth grade elementary school teacher and has two children, Katherine (age 12) and Thomas (age 7). When he’s not crunching numbers, Philip enjoys attending his children’s school and extracurricular activities, watching movies, following politics and traveling.

New Tax Law Brings Changes to 529 Plans

By Liz Belcher, CPA
Manager, Tax Services
lbelcher@sponselcpagroup.com

The new tax law signed by the president at the end of last year included some significant changes to 529 plans that taxpayers need to know.

As most are aware, a 529 plan distribution is tax-free if it is used to pay for “qualified higher education expenses” of the beneficiary. Before the recent tax legislation was passed, tuition for elementary or secondary schools was not considered a “qualified higher education expense” for 529 plan distribution purposes.

Federal 529 Plan Changes

The new tax law provides that qualified higher education expenses now include expenses for tuition in connection with an elementary or secondary public, private or religious school (i.e. K-12 tuition). Thus, tax-free distributions from 529 plans can now be received by beneficiaries who pay these expenses, effective for distributions from 529 plans after 2017.

It’s important to be aware that there is a limit to how much of a distribution can be taken from a 529 plan for elementary and secondary tuition expenses. The amount of cash distributions from all 529 plans per single beneficiary during any tax year can’t, when combined, include more than $10,000 for elementary school and secondary school tuition incurred during the tax year.

Indiana 529 Plan Changes

In addition to the federal tax law, Indiana also made changes to its 529 plan program that taxpayers need to keep in mind, especially those claiming an Indiana tax credit for 529 plan contributions.

In May 2018, Indiana amended its code to create a tax credit for those saving tuition expenses in connection with enrollment or attendance at an elementary or secondary public, private or religious school located in Indiana (K-12 tuition).

For the tax year beginning January 1, 2018, Indiana taxpayers may receive a 10% state income tax credit against their adjusted gross income tax liability. This credit cannot exceed $500 for contributions to an account that will be used to pay for Indiana K-12 tuition. When combined with the state income tax credit taken for qualified higher education expenses (i.e. post-secondary expenses), the maximum annual income tax credit cannot exceed $1,000.

Effective January 1, 2019, the income tax credit for contributions made to an account being used to pay Indiana K-12 tuition increases to 20% — up to a maximum of $1,000 when combined with any Indiana income tax credit taken for qualified higher education expenses. Also at the time a contribution is made to an Account, the contributor must designate whether the contribution is made for (I) Qualified Expenses that are not Indiana K-12 Tuition; or (II) Indiana K-12 Tuition. Likewise, at the time of withdrawal from an account, the account owner must designate whether the withdrawal will be used for (I) Qualified Expenses that are not Indiana K-12 Tuition; or (II) Indiana K-12 Tuition. It’s important for taxpayers to understand the Indiana rules for which a credit is claimed as a non-qualified distribution will result in the repayment of a previously claimed Indiana credit.

If you have any questions about how the new 529 plan changes will impact you, please call Liz Belcher at (317) 613-7846 or e-mail lbelcher@sponselcpagroup.com.

Employee Spotlight — Ryan Hodell

Ryan Hodell joined Sponsel in January of 2015, fresh off the heels of graduating from Marian University with a bachelor’s degree in accounting and finance.

Last year, Ryan earned his CPA license, and he currently serves as a member of the Indiana CPA Society. This year, Ryan was promoted to a senior staff accountant in the tax services department, where he performs a variety of tax compliance and consulting services for individuals and businesses in addition to providing various tax planning and projection services.

Outside of work, Ryan enjoys spending time with his wife. (They tied the knot just last month!) He also loves playing golf and cheering on his favorite baseball and football teams — the Los Angeles Angels and Chargers.

Employee Spotlight — Abigail Hedges

Abigail Hedges started at Sponsel in September of last year, right on the heels of her graduation from Taylor University, where she earned a bachelor’s degree in accounting and management.

As a Staff Accountant in the Tax Services department, her role involves preparing individual, business, non-profit, fiduciary and other tax returns.

Two months after she started at Sponsel, Abigail tied the knot with the love of her life. Outside of work, she enjoys cooking, reading, working on puzzles and watching movies with her wonderful husband.

The Deep Dive: Significant Changes to Itemized Deductions

By Josie Dillon, CPA
Manager, Tax Services
JDillon@sponselcpagroup.com

The Deep Dive takes a closer look at individual aspects of the new tax law and how they might affect you or your business.

The Tax Cuts and Jobs Act (TCJA) has brought many changes for individual income tax filers, including significant changes to some of the more popular deductions.

As was the case under previous law, individual tax filers can still subtract from adjusted gross income (AGI) their option of either a standard deduction or the sum of their itemized deductions to arrive at taxable income. However, the Tax Act has nearly doubled the “standard deduction” amount. The standard deduction for 2018 is $24,000 for joint filers; $18,000 for heads of household; and $12,000 for singles or married taxpayers filing separately. The standard deduction figures will be indexed for inflation after 2018. Given these increases, fewer taxpayers will benefit from itemizing deductions.

In addition to the increase in the standard deduction amounts, the new tax law also made changes to several itemized deductions which are explained in more detail below.

Limitation on State and Local Taxes Paid

The new tax law has placed limits on an individual’s ability to deduct state and local taxes as an itemized deduction. Before the changes were effective, individuals were permitted to claim the various types of taxes – real property taxes, personal property taxes, state and local income taxes, and state and local sales taxes (if elected) – as itemized deductions.

For tax years 2018 through 2025, the new tax law limits deductions for taxes paid by individual taxpayers in the following ways:

  • The new law limits the aggregate deduction for state and local real property taxes; state and local personal property taxes; state and local, and foreign, income, war profits, and excess profits taxes; and general sales taxes (if elected) for any tax year to $10,000 ($5,000 for married filing separately). Important Note: The $10,000 limit doesn’t apply if the taxes are paid or accrued in carrying on a trade or business or in an activity meant for the production of income.
  • The new law also completely eliminates the deduction for foreign real property taxes unless they are paid or accrued in carrying on a trade or business or in an activity engaged in for profit.

See previous Sponsel CPA Group article regarding the deductability of prepaid real estate taxes as a result of the new tax law.

Mortgage Interest Deduction

For tax years beginning after 2017 and before 2026, the TCJA modifies the mortgage interest deduction rules, as follows:

  • Acquisition Indebtedness – The deduction for mortgage interest on a principle or second residence is limited to underlying indebtedness of up to $750,000 (down from the $1 million under prior law). The lower $750K limit does not apply to any acquisition indebtedness incurred on or before December 15, 2017. Additionally, the $1 million limitation continues to apply to taxpayers who refinance existing qualified residence indebtedness that was incurred on or before December 15, 2017, so long as the indebtedness resulting from the refinancing doesn’t exceed the amount of refinanced indebtedness.
  • Home Equity Indebtedness – Taxpayers can no longer claim a mortgage interest deduction for interest paid on home equity indebtedness. Under prior law taxpayers could claim a deduction for the interest paid on home equity indebtedness with a loan value up to $100,000. Home equity indebtedness is any indebtedness (other than acquisition indebtedness) secured by a qualified residence. Acquisition indebtedness is any indebtedness incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer, and it is secured by such residence.

Charitable Contribution Deduction

For contributions made in tax years beginning after December 31, 2017 and before January 1, 2026 taxpayers can deduct cash contributions to public charities and certain private foundations up to 60% of their AGI (under prior law the deduction was limited to 50% of AGI).

In addition, some experts are predicting a significant decline in charitable contributions as many taxpayers will no longer receive a tax benefit as their total itemized deductions will not exceed the increased standard deduction amount. However, there are still some planning opportunities for charitably inclined taxpayers looking to optimize their deductions. For instance, “qualified charitable distributions” directly from a taxpayer’s IRA remain unaffected by the Tax Act, and “donor advised funds” allow for charitable deductions in one year, with the funds available for distribution to charities in subsequent years.

Other Changes to Itemized Deductions

  • Medical expenses are deductible after they exceed 7.5% of AGI for tax years 2017 and 2018. Previously, the AGI floor was 10% for most taxpayers.
  • Casualty and theft losses have been suspended except for losses incurred in a federally declared disaster.
  • There is no longer a deduction for miscellaneous itemized deductions, which were formerly deductible to the extent they exceeded 2% of AGI. This included such deductions as tax preparation costs, investment expenses, union dues and unreimbursed employee expenses.
  • The overall limitation on itemized deductions that formerly applied to taxpayers whose AGI exceeded specified thresholds has been suspended.

Sponsel CPA Group is here to help you manage these significant changes and maximize your benefits. If you have any questions about the new tax reform law, please call Josie Dillon at (317) 613-7841 or email JDillon@sponselcpagroup.com.

Click here for detailed article on “Modifications to Deductions of Losses” 
Click here for detailed article on “Business Expense Deduction Limitations”
Click here for detailed article on the “Pass-Through Income Deduction”
Click here for detailed article on “Changes to Fringe Benefit Rules for Employers”
Click here for detailed article on “New Favorable Depreciation Provisions”
Click here for summary of “Key Provisions Affecting Individual Taxpayers”
Click here for summary of “Key Provisions Affecting Business Taxpayers”

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