10 Tax Moves You Must Make Before December 31st

@hao CC BY 4.0

Video: https://www.youtube.com/watch?v=yAa-SWxQ3FY

Business Strategies and Depreciation (0:01)

  • Discussed cost segregation, bonus depreciation, and Section 179 as key strategies.

  • Bonus depreciation allows full write-off for assets under 20-year life, but has restrictions like vehicle weight.

  • Section 179 is more surgical, allowing selective asset write-offs but cannot create a loss.

Short-term Rental Tax Benefits (3:45)

  • Short-term rentals (average stay 7 days or less) can be classified as a trade or business.

  • Material participation is required; 100 hours more than others is a common test.

  • Allows use of cost segregation and bonus depreciation to create paper losses against other income.

Oil and Gas Investment Deductions (7:30)

  • Investments in working interest of oil operations offer significant deductions.

  • Intangible drilling costs allow for upfront deductions; depletion deduction on royalties.

  • Effective for high-income individuals seeking non-passive ordinary income offsets.

Health Savings Accounts (HSAs) (10:25)

  • HSAs offer pre-tax deductions for medical expenses and grow tax-free.

  • 2025 limits: $4,300 for individuals, $8,500 for families, with additional catch-up contributions.

  • Requires a high deductible health plan; funds can be used tax-free for healthcare expenses.

Donor-Advised Funds and Charitable Giving (12:45)

  • 2025 last year for advantageous charitable giving without a floor or cap.

  • Donate appreciated assets for deductions at fair market value.

  • Qualified charitable distributions from IRAs for over 70.5-year-olds.

Retirement Plan Contributions (16:00)

  • Employee contributions to IRAs and 401(k)s must be made by year-end.

  • Employer contributions can be made until tax filing deadline.

  • Defined benefit plans can also be funded up to tax return filing.

Accountable Plan Reimbursements (19:00)

  • Allows tax-free reimbursements for employee expenses by the company.

  • Must be in writing and reimbursed before year-end.

  • Applies to home office, corporate meetings, and equipment expenses.

Stock Loss Harvesting (22:00)

  • Use carryover losses to offset capital gains and reduce taxable income.

  • No wash sale gain rule, so gains can be captured tax-free.

  • Strategy involves selling at a loss and buying back with an option workaround.

Paying Children and Gifting Strategies (25:00)

  • Pay children through sole proprietorships or partnerships for tax-free income up to $15,750.

  • Avoid employment taxes in certain business structures.

  • Gift appreciated assets to utilize children's lower tax rates.

Tax Bracket Management (29:00)

  • Focus on keeping income in lower tax brackets by using deductions and credits.

  • Avoid phase-outs and maximize 199A deductions.

  • Roth conversions should consider expected future tax brackets.