Tax Archives - Page 20 of 48 - Whalen & Company, CPAs

Real Property Tax Valuation Relief

Kathleen Hargrove on April 28, 2021

Governor DeWine signed into law Senate Bill 57 yesterday (4/27) to provide further relief and assistance to Ohio taxpayers who have experienced a decline in the value of their real estate due to the COVID-19 pandemic.

Sponsored by State Sen. Bob D. Hackett (R-10th District) and State Sen. Nickie J. Antonio (R-23rd District), Senate Bill 57 modifies the law regarding property tax exemptions and procedures to authorize COVID-19-related property tax valuation complaints.

The law goes into effect on July 26, 2021. If you are an Ohio real property tax taxpayer who believes the value of your property has depreciated due to the impact of COVID-19 pandemic, you can file a complaint beginning on this effective date. Complaints must be filed on or before August 25, 2021.

It also authorizes an eligible party can file a special “COVID-19” complaint with the specific county Board of Revision requesting that a property’s tax valuation for tax year 2020 be determined as of October 1, 2020, instead of the typically mandated tax lien date of January 1, 2020.

Ohio’s statutory restriction on filing only one complaint in each three-year valuation period can also be waived if an owner chooses to file a tax year 2020 COVID-19 complaint.

If you have any questions on this new law, please contact your Whalen advisor for assistance.

Unemployed last year? Buying health insurance this year? You may benefit from favorable new changes

Kathleen Hargrove on April 22, 2021

In recent months, there have been a number of tax changes that may affect your individual tax bill. Many of these changes were enacted to help mitigate the financial damage caused by COVID-19.

Here are two changes that may result in tax savings for you on your 2020 or 2021 tax returns. The 2020 return is due on May 17, 2021 (because the IRS extended many due dates from the usual April 15 this year). If you can’t file by that date, you can request an extra five months to file your 2020 tax return by October 15, 2021. Your 2021 return will be due in April of 2022.

1.Some unemployment compensation from last year is tax free.

Many people lost their jobs last year due to pandemic shutdowns. Generally, unemployment compensation is included in gross income for federal tax purposes. But thanks to the American Rescue Plan Act (ARPA), enacted on March 11, 2021, up to $10,200 of unemployment compensation can be excluded from federal gross income on 2020 federal returns for taxpayers with an adjusted gross income (AGI) under $150,000. In the case of a joint return, the first $10,200 per spouse isn’t included in gross income. That means if both spouses lost their jobs and collected unemployment last year, they’re eligible for up to a $20,400 exclusion.

However, keep in mind that some states tax unemployment compensation that is exempt from federal income tax under the ARPA.

The IRS has announced that taxpayers who already filed their 2020 individual tax returns without taking advantage of the 2020 unemployment benefit exclusion, don’t need to file an amended return to take advantage of it. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.

The IRS will take steps in the spring and summer to make the appropriate change to the returns, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.

2.More taxpayers may qualify for a tax credit for buying health insurance.

The premium tax credit (PTC) is a refundable credit that assists individuals and families in paying for health insurance obtained through a Marketplace established under the Affordable Care Act. The ARPA made several significant enhancements to this credit.

For example, under pre-ARPA law, individuals with household income above 400% of the federal poverty line (FPL) weren’t eligible for the PTC. But under the new law, for 2021 and 2022, the premium tax credit is available to taxpayers with household incomes that exceed 400% of the FPL. This change increases the number of people who are eligible for the credit.

Let’s say a 45-year-old unmarried man has income of $58,000 (450% of FPL) in 2021. He wouldn’t have been eligible for the PTC before ARPA was enacted. But under the ARPA, he’s eligible for a premium tax credit of about $1,250.

Other favorable changes were also made to the premium tax credit.

Many more changes

The 2020 unemployment benefit exclusion and the enhanced premium tax credit are just two of the many recent tax changes that may be beneficial to you. Contact us if you have questions about your situation.

Home sales: How to determine your “basis”

Kathleen Hargrove on April 13, 2021

The housing market in many parts of the country is strong this spring. If you’re buying or selling a home, you should know how to determine your “basis.”

How it works

You can claim an itemized deduction on your tax return for real estate taxes and home mortgage interest. Most other home ownership costs can’t be deducted currently. However, these costs may increase your home’s “basis” (your cost for tax purposes). And a higher basis can save taxes when you sell.

The law allows an exclusion from income for all or part of the gain realized on the sale of your home. The general exclusion limit is $250,000 ($500,000 for married taxpayers). You may feel the exclusion amount makes keeping track of the basis relatively unimportant. Many homes today sell for less than $500,000. However, that reasoning doesn’t take into account what may happen in the future. If history is any indication, a home that’s owned for 20 or 30 years appreciates greatly. Thus, you want your basis to be as high as possible in order to avoid or reduce the tax that may result when you eventually sell.

Good recordkeeping

To prove the amount of your basis, keep accurate records of your purchase price, closing costs, and other expenses that increase your basis. Save receipts and other records for improvements and additions you make to the home. When you eventually sell, your basis will establish the amount of your gain. Keep the supporting documentation for at least three years after you file your return for the sale year.

Start with the purchase price

The main element in your home’s basis is the purchase price. This includes your down payment and any debt, such as a mortgage. It also includes certain settlement or closing costs. If you had your house built on land you own, your basis is the cost of the land plus certain costs to complete the house.

You add to the cost of your home expenses that you paid in connection with the purchase, including attorney’s fees, abstract fees, owner’s title insurance, recording fees and transfer taxes. The basis of your home is affected by expenses after a casualty to restore damaged property and depreciation if you used your home for business or rental purposes,

Over time, you may make additions and improvements to your home. Add the cost of these improvements to your basis. Improvements that add to your home’s basis include:

A room addition,
Finishing the basement,
A fence,
Storm windows or doors,
A new heating or central air conditioning system,
Flooring,
A new roof, and
Driveway paving.

Home expenses that don’t add much to the value or the property’s life are considered repairs, not improvements. Therefore, you can’t add them to the property’s basis. Repairs include painting, fixing gutters, repairing leaks and replacing broken windows. However, an entire job is considered an improvement if items that would otherwise be considered repairs are done as part of extensive remodeling.

The cost of appliances purchased for your home generally don’t add to your basis unless they are considered attached to the house. Thus, the cost of a built-in oven or range would increase basis. But an appliance that can be easily removed wouldn’t.

Plan for best results

Other rules and requirements may apply. We can help you plan for the best tax results involving your home’s basis.

Updated Guidance on Food/Beverage Deductions

Kathleen Hargrove on April 9, 2021

The Treasury Department and the IRS have issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020. The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.

Beginning January 1, 2021, through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.

Where can businesses get food and beverages and claim 100%?

Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores.

Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.

If you have any questions on this updated guidance, please contact your Whalen advisor or refer to the IRS Notice containing further details.

Ohio Income Tax Update: Unemployment Benefits

Kathleen Hargrove on April 8, 2021

Last month, Sub. S.B. 18 was signed into law. This incorporates recent federal tax changes into Ohio law effective immediately.

Specifically, federal tax changes related to unemployment benefits in the federal American Rescue Plan Act (ARPA) of 2021 will impact some individuals who have already filed or will soon be filing their 2020 Ohio IT 1040 and SD 100 returns (due by May 17, 2021).

Ohio taxes unemployment benefits to the extent they are included in federal adjusted gross income (AGI). Due to the ARPA, the IRS is allowing certain taxpayers to deduct up to $10,200 in unemployment benefits. Certain married taxpayers who both received unemployment benefits can each deduct up to $10,200. This deduction is factored into the calculation of a taxpayer’s federal AGI, which is the starting point for Ohio’s income tax computation.

Many taxpayers filed their 2020 federal and Ohio income tax returns and reported their unemployment benefits prior to the enactment of this deduction.

As such, ODT offers the following guidance related to the unemployment benefits deduction for tax year 2020:

Taxpayers who previously filed federal and Ohio tax returns and are waiting for IRS to issue a refund based on the unemployment benefits deduction.

All other taxpayers who previously filed their federal and Ohio returns prior to the enactment of this federal deduction and are waiting for the IRS to issue a refund based on the unemployment benefits deduction do not need to take any additional action on their originally filed Ohio IT 1040 return (and/or SD 100) at this time. The Department will provide further guidance when more details are available from the IRS, please continue to monitor our website.

Taxpayers who previously filed federal and Ohio tax returns without the unemployment benefits deduction, but who are not entitled to any additional Ohio refund.

Taxpayers who previously filed their federal and Ohio returns prior to the enactment of this federal deduction and whose Ohio income tax liability amount (IT 1040, line 10) was $0, do not need to take any additional action. Such taxpayers are not entitled to any additional Ohio refund.

Taxpayers who are amending their federal return to claim the unemployment benefits deduction.

Taxpayers who file an amended federal return should wait to file their amended Ohio IT 1040 (and an amended SD 100 if applicable) until the IRS has approved the requested changes.

Please note that the IRS does not recommend filing an amended return for the adjustment at this time.

The IRS’s current guidance on the federal taxation of unemployment benefits can be found here and how they will recalculate taxes on unemployment benefits can be found here.

If you have additional questions or need assistance, please work with your Whalen Advisor.

SOURCE: Ohio Department of Taxation

Category: Tax

News & Tech Tips

Real Property Tax Valuation Relief

Unemployed last year? Buying health insurance this year? You may benefit from favorable new changes

Home sales: How to determine your “basis”

Updated Guidance on Food/Beverage Deductions

Ohio Income Tax Update: Unemployment Benefits