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Qualified Opportunity Zones: What Investors Should Know About Tax Benefits

Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning. If you are interested in how this might specifically benefit your business or portfolio, please don’t hesitate to reach out in detail today to schedule a free initial consultation regarding your specific facts and circumstances.

What is an Opportunity Zone?

An Opportunity Zone is a community nominated by the state and certified by the Treasury Department as qualifying for this program. As of June 14, 2018, the department certified zones in all 50 states, Washington, D.C., and U.S. territories.  

How does this program work?

To defer a gain, a taxpayer has 180 days from the date of the sale or exchange of appreciated property to invest the realized gain into a Qualified Opportunity Zone Fund. The fund then invests in Qualified Opportunity Zone Property.

The taxpayer may invest the return of principal as well as the recognized capital gain, but only the portion of the investment attributable to the capital gain will be eligible for the exemption from tax on further appreciation of the Opportunity Zone Investment. The Opportunity Zone program allows for the sale of any appreciated assets, such as stock with a reinvestment of the gain into an Opportunity Zone Fund. There is no requirement to invest in a like-kind property to defer the gain.

Qualified Opportunity Zone Fund

A Qualified Opportunity Zone Fund is any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property.

What To Know About Tax Implications

It is important to note that the tax cannot be deferred indefinitely – only until 2026. Any tax due on capital gains invested in the fund within the 180-days is deferred until the fund is divested, or December 31, 2026, whichever occurs first. Qualifying for deferral does not require an intermediary, and the taxpayer has 180 days from a sale to invest the gains into an Opportunity Zone Fund.

The new program offers a deferral of short or long-term capital gains tax due, a potential reduction of short and long-term capital gains tax due, and lastly a potential permanent exclusion from taxable income for any capital gains generated in any qualified investment made in the Opportunity Zone Funds.

If investment in the fund is held at least 5 years, there will be a 10 percent basis step up, while if the investment is held at least 7 years, the basis step up will be 15 percent. If the investment in the fund is held for at least 10 years, the taxpayer is exempt from paying any capital gain on the sale of the newly created opportunity zone fund investment.

Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, please don’t hesitate to give us a call today. One of our friendly and knowledgeable representatives will be happy to answers any questions you have.

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What Charlotte Business Owners Need to Know About 2018 Tax Changes

Here at Camuso CPA, we offer a wide array of tax services for small business owners in Charlotte including tax preparation and tax planning. Financial service and technology companies are transitioning from employee driven revenue models to information driven revenue models.

Camuso CPA strives to deliver useful insights and offer relevant explanations about the latest tax and financial topics. Be sure to contact our team today for any immediate tax needs or questions.

On 22 December 2017, the President signed tax reform legislation known as the Tax Cuts and Jobs Act (TCJA). While the full implications of the Tax Cuts and Jobs Act are still unraveling, a number of tax-planning opportunities have presented themselves. Here we will outline how these changes impact small business owners.

THE NEW CORPORATE TAX RATE IS LOWER — AND PERMANENT

The new corporate tax rate is 21 percent. And this change will live on past 2025, which is when most of the other tax-law changes are set to expire. The new rate is also a flat tax, meaning it’s the same for all C corporations — that’s different from the previous corporate tax rates, which were 15, 25, 34 and 35 percent.

THE CORPORATE AMT IS ELIMINATED

Similar to the individual alternative minimum tax, corporate AMT was an additional way to calculate taxes to help ensure corporations paid a minimum amount of tax. Eliminating the corporate AMT also means getting rid of some of the tax liabilities for corporations that used to factor into the AMT calculation.

PASS-THROUGH BUSINESSES GET A LARGE DEDUCTION

The Tax Cuts and Jobs Act (TCJA). This is primarily known for reducing corporate tax rates to 21%, but the new Section 199A provides non-corporate taxpayers with a potential 20% deduction against taxable income, which, when applicable, effectively discounts the maximum 37% non-corporate rate to 29.6%.

The 20% discount requires a complicated formulaic deduction equal to: (1) 20% of newly defined qualified business income plus (2) 20% of the sum of (a) REIT dividends and (b) publicly traded partnership income. For taxpayers with income over certain minimal thresholds, the 20% of qualified business income deduction is limited to the greater of: (a) 50% of the W-2 wages paid by the qualified business, or (b) 25% of the W-2 wages paid by the qualified business, plus 2.5% of the unadjusted basis of depreciable property held by the business.

Taxpayers should consider evaluating the choice of entity used to operate their businesses. The 21-percent reduced corporate tax rate may increase the popularity of corporations. However, factors such as the new 20-percent deduction for pass-through income, expected use of after-tax cash earnings, and potential exit values will significantly complicate these analyses. The potential after-tax cash benefits ultimately realized by owners could make choice-of-entity determinations one of the most important decision taxpayers will now make.

NOL CARRYBACKS ARE ELIMINATE AND CARRYFORWARDS REDUCED

Previously, businesses were able to offset current taxable income by claiming net operating losses (NOLs), generally eligible for a two-year carryback and 20-year carryforward.  Now NOLs for tax years ending after 2017 cannot be carried back, but can be indefinitely carried forward. In addition, NOLs for tax years beginning in 2018 will be subject to an 80-percent limitation. Companies will have to track their NOLs in different buckets and consider cost recovery strategy on depreciable assets in applying the 80-percent limitation.

ACCOUNTING METHOD CHANGES

Under the new law, accrual basis taxpayers must now recognize income no later than the taxable year in which such income is taken into account as revenue in an applicable financial statement.

However, new provisions also provide favorable methods of accounting that were not previously available. That, coupled with the reduction in tax rates, creates a favorable and unique environment for filing accounting method changes.

2018 will see the first significant tax reform since 1986. This reform affects everything in the economy as well as everyone in the country. The ways it will affect individuals, couples, corporations and small business owners will vary, but everyone will see changes in 2018.

If you are searching for local CPA firms in Charlotte to assist you with taxes, contact Camuso CPA. Whether you need tax preparation services, personal or business tax planning for the new tax law changes, Camuso CPA can help.

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What Rising Property Taxes Means for Charlotte Apartment Owners and Renters

Mecklenburg County will be issuing 365,000 property tax valuations this January. This will impact not only apartment owners and real estate owners but also renters.

While property taxes typically have the biggest up-front impact on homeowners, who get the bills directly, this year’s revaluation is raising property values far more for commercial properties. That could mean higher property taxes for those apartments when bills go out in July, and apartment owners are likely to pass at least some of that increased cost to tenants.

According to the U.S. Census, almost half of the residents in Charlotte rent. The county plans to finish its initial revaluation of every property in Mecklenburg by the end of the year. Some of the commercial properties that are likely to see the biggest tax increases since the 2011 revaluation appear to be older apartments, many of which have been bought by investors in recent years.

If you searching for local CPA firms in Charlotte to assist you with reporting income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from real estate on your taxes or any other service provided by a certified accountant, Camuso CPA can help.

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Tax Planning For Cryptocurrency and Wash Sales – How Can You Minimize Taxes

Here at Camuso CPA, we offer a wide array of tax services for investors including tax preparation and tax planning. Financial service and technology companies are transitioning from employee driven revenue models to information driven revenue models. Camuso CPA strives to deliver useful insights and offer relevant explanations about the latest tax and financial topics.

In our Experienced CryptoCPA Tax Topics & Guides segment, we are taking a more in depth approach in covering all things cryptocurrency, tax, real estate and finance.

Since cryptocurrencies are generally classified as property, wash sale regulations should not currently be a concern for investors. This means investors can sell an investment to realize a tax loss, only to buy it back immediately thereafter at a bargain. Today, wash sales only apply to stocks and securities, so traders are operating in a gray area for now until further IRS clarification is issued.

 

 

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If you searching for CPA firms to assist you with reporting cryptocurrency income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from virtual currencies on your taxes, cryptocurrency portfolio analysis, or any other service provided by a certified accountant, Camuso CPA can help.

 

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How 2018 Tax Law Changes Affects Real Estate Investors

Here at Camuso CPA, we offer a wide array of tax services for investors including tax preparation and tax planning. Financial service companies are transitioning from employee driven revenue models to information driven revenue models. Camuso CPA strives to deliver useful insights and offer relevant explanations about the latest tax and financial topics.

In our Tax Topics & Guides segment, we are taking a more in depth approach in covering all things tax, real estate and finance.

While the full implications of the Tax Cuts and Jobs Act are still unraveling, a number of tax-planning opportunities have presented themselves. Here we will outline how performing cost segregation studies can lead to permanent tax savings. On 22 December 2017, the President signed tax reform legislation known as the Tax Cuts and Jobs Act (TCJA). This is primarily known for reducing corporate tax rates to 21%, but the new Section 199A provides non-corporate taxpayers with a potential 20% deduction against taxable income, which, when applicable, effectively discounts the maximum 37% non-corporate rate to 29.6%.

   

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If you searching for CPA firms to assist you with reporting cryptocurrency income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from virtual currencies on your taxes, cryptocurrency portfolio analysis, or any other service provided by a certified accountant, Camuso CPA can help.

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Spending Cryptocurrency Can Be a Huge Tax Trap, Learn How

With an exponential gain in value and thousands of businesses now accepting it as a form of payment, Bitcoin has quickly become one of the trending topics throughout the country. While there are various types of cryptocurrency out there, Bitcoin is currently the most popular form of digital currency (also known as virtual or cryptocurrency) throughout the world and is able to be exchanged for U.S dollars, Euros, and other real currency. In addition, Bitcoin can be traded for other virtual currencies, such as Ripple or Ethereum currency.

Whether people use cryptocurrencies to pay for products and services or strictly for investment purposes, they may not be aware that they have a possible taxable impact.

If a taxpayer purchases s virtual currency and uses it to purchase something (trades the cryptocurrecy for a good or service), the IRS requires him to calculate a capital gain or loss on each transaction. Capital gains on personal-use property are reportable and subject to tax.

The AICPA recently asked the IRS for some equitable relief by adopting a “de minimus election,” which provides a $200 threshold for excluding capital gains income on personal transactions. This is not yet in effect and as a result, taxpayers are on the hook for tax liability with all cryptocurrency transactions.

If you searching for CPA firms to assist you with reporting cryptocurrency income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from virtual currencies on your taxes, cryptocurrency portfolio analysis, or any other service provided by a certified accountant, Camuso CPA can help.

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How Real Estate Investing Impacts Investors Tax Rate

Investors focus on real estate for a variety of reasons. There are great tax benefits for real estate investors and most investors agree that, while supplemental, they invest to reduce their tax burden.

After consulting and strategizing with hundreds of investors, I’ve come to realize that most don’t actually know how real estate investing impacts tax rates. Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning.

Effective Tax Rate – What Is it?

The effective tax rate is defined at the tax liability divided by total net income. Your federal tax liability is found on Line 63 of Form 1040. However, if you hold a W-2 job, you also need to factor in your share of FICA taxes (7.65% of your gross wages). Lastly, you should also factor in your state tax liability. The combination of these three taxes will yield your total tax. You will then divide your total tax by gross wages plus net income from trades, businesses, and investments. Note that net income does not equal net taxable income. The result will be your effective tax rate.

Real Estate Benefits

The largest benefit for real estate investors results in additional non-cash deductions that they can take against their rental income such as depreciation and amortization. These benefits can be furthered increased through cost segregation studies.

Many real estate investors may see an increase in total tax and think that real estate is not offering its promised tax benefits. But that’s clearly not the case. Thanks to the real estate generating income that was not taxed, our effective tax rate drops meaning you are paying less in tax per dollar earned.

Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, please don’t hesitate to give us a call today. One of our friendly and knowledgeable representatives will be happy to answers any questions you have.

Read more

How Tax Reform Impacts Real Estate Investors Tax Rates

Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning.

While the full implications of the Tax Cuts and Jobs Act are still unraveling, a number of tax-planning opportunities have presented themselves. Here we will outline how performing cost segregation studies can lead to permanent tax savings.

On 22 December 2017, the President signed tax reform legislation known as the Tax Cuts and Jobs Act (TCJA). This is primarily known for reducing corporate tax rates to 21%, but the new Section 199A provides non-corporate taxpayers with a potential 20% deduction against taxable income, which, when applicable, effectively discounts the maximum 37% non-corporate rate to 29.6%.

How Does It Work

The 20% discount requires a complicated formulaic deduction equal to: (1) 20% of newly defined qualified business income plus (2) 20% of the sum of (a) REIT dividends and (b) publicly traded partnership income. For taxpayers with income over certain minimal thresholds, the 20% of qualified business income deduction is limited to the greater of: (a) 50% of the W-2 wages paid by the qualified business, or (b) 25% of the W-2 wages paid by the qualified business, plus 2.5% of the unadjusted basis of depreciable property held by the business.

These limitations are calculated at the individual level and the statutory language indicates that the limitation is to be applied separately for each qualified trade or business that the taxpayer is engaged in.

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Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, please don’t hesitate to give us a call today. One of our friendly and knowledgeable representatives will be happy to answers any questions you have.

Read more

Tax Planning For Cryptocurrency Miners

Miners are a critical part of the cryptocurrency ecosystem. New coins and bitcoin forks are being developed every day with the goal of making mining easier for both existing mining pools and new market participants. But now that an increasing number of individuals and businesses are receiving mining income, tax compliance and tax planning become an imperative consideration for any reputable operation.

Tax implications of mining cryptocurrencies

Cryptocurrency miners have two separate tax exposures. The first is the tax at the fair market value of the virtual currency on the day that it is mined into gross income. Generally, the net earnings from this activity will be exposed to self-employment tax.

The second is the capital gains which are due on the sale of bitcoins viewed as a capital asset. The basis price for the coins will be the fair market value on the date of acquisition. Capital gains will be due on the difference between that basis price and the eventual sale price.

When a miner sells their cryptocurrencies that they have mined, they will have to pay capital gains tax on any profit that they have made while owning them. The exception here is if bitcoins aren’t viewed as capital assets,but are instead viewed as inventory. This would be the case if a miner’s core business is selling cryptocurrencies. In that case, any gains on the bitcoins would be taxed as an ordinary gain or loss.

IRS Notice 2014-21 clarifies the treatment for bitcoin miners. Specifically, miners must recognize income for each bitcoin mined during the taxable year. The amount of income is equal to the market price of bitcoin on the day it is awarded on the blockchain. This also becomes the miner’s basis in the bitcoin going forward and will be used to calculate gain/loss in the future when the bitcoin is sold.

Protecting Your Assets and Minimizing Tax Exposure

The first major step in choosing your tax treatment is selecting a business entity for your operations. You have four main choices:

Sole proprietorship

Partnership

C corporation

S corporation

To determine whether the S corporation is the right entity structure for your business, you have to know how it compares to your other options. The two main benefits of operating your business as an S-Corporation is relief from double taxation, and savings on employment taxes. Tax planning and industry financial expertise is critical in this area.

If you plan to raise capital or own real estate as part of your mining operation this should also be considered during your entity structuring planning and may require establishing multiple entities.

Most miners use expensive hardware and substantial amounts of electricity to verify transactions on a decentralized blockchain network. Mining expenses, such as electricity, would not be included into basis. Instead, they would be deductible in the taxable year as an expense. Maintaining proper documentation is essential. Depreciation of the equipment used in mining will be the other largest tax deduction for miners.

If you searching for CPA firms i to assist you with reporting cryptocurrency mining income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from virtual currencies on your taxes, cryptocurrency portfolio analysis, or any other service provided by a certified accountant, Camuso CPA can help.

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CFA 2019 Exam Includes Crypto And Blockchain Topics

According to Bloomberg, the Chartered Financial Analyst (CFA) examination has added cryptocurrency and blockchain to its curriculum. Candidates for this exam are generally expected to clock 300 hours of study time.

The exam, run by the CFA institute, has reportedly prepared over 150,000 financial sector professionals through its intensive 3-tiered program, which is now set to include crypto and blockchain as part of its Level I and II curricula.

Crypto and blockchain have now been added as part of a new section called ‘Fintech in Investment Management,’ for which the materials will be released this August in preparation for CFA’s 2019 exams.

The fact that the new CFA exams in 2019 will include cryptocurrencies and blockchain, is a sign that the digital assets have arrived in Wallstreet. While digital coins have decreased in value in 2018 and the real-world impact of blockchain ventures could ultimately transform the global financial system.

If you are searching for CPA firms to assist you with reporting cryptocurrency income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from virtual currencies on your taxes, cryptocurrency portfolio analysis, or any other service provided by a certified accountant, Camuso CPA can help.

Patrick Camuso, CPA is founder and owner of Camuso CPA, a Charlotte, NC based CPA firm consulting to cryptocurrency investors, miners and business nationwide.

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