Selling Your Home? Here’s How It May Affect Your Taxes

Selling Your Home? Here’s How It May Affect Your Taxes

In this current seller’s market, you may be considering selling your first or second home. If so, keep in mind how selling your home may affect your tax return. When filing your taxes, you may qualify to exclude all or part of any gain from the sale from your income.

What You Need to Know

Ownership & Use — To claim the exclusion, you must meet ownership and use tests. During a five-year period ending on the date of the sale, you must have owned the home and lived in it as your main home for at least two years.

Gains — If you sell your main home and have a gain from the sale, you may be able to exclude up to $250,000 of that gain from your income. If you file jointly, you may be able to exclude up to $500,000. If you can exclude all the gain, you do not need to report the sale on your tax return.

Losses — If you experience a loss when you sell your main home (e.g., it sells for less than what you paid for it), you cannot deduct the loss from your taxes.

Multiple Homes — If you own more than one home, you can only exclude the gain on the sale of your main home. You must pay taxes on any gain you receive from selling any other home.

Reported Sale — If you do not qualify to exclude all the taxable gain from your income, you must report the gain from the sale of your home when you file your tax return. This is why it’s important to keep all of the paperwork related to the purchase and sale of your home, including any Form 1099-S, Proceeds from Real Estate Transactions, you receive.

Run the Numbers

Of course, there are exceptions to the rules for some individuals, including persons with a disability, certain members of the military, intelligence community and Peace Corps workers. If you’re wondering how a home sale will affect your taxes, feel free to contact us. We’ll be happy to help you work through the numbers to determine any financial impact. Please contact us to schedule an appointment.

Are You Paying Enough Tax Throughout the Year?

Federal taxes are pay-as-you-go — meaning you need to pay most of your federal income taxes during the year as you earn income. This is handled either through withholding by your employer in your regular paycheck or by making estimated tax payments yourself.

If the amount of income tax withheld from your salary or pension is not enough, or if you receive interest, dividends, alimony, capital gains, prizes, awards or other income, you may need to adjust your withholding or make estimated tax payments. (This also applies if you are self-employed.) If you don’t pay enough taxes throughout the year, you may be penalized when you file your federal income tax forms next year.

Adjust Your Withholding

If your employer withholds your taxes, you should review the amount taken out each paycheck to make sure you’re having enough tax withheld (but not too much). We can help you determine how much to withhold, or you can use the IRS Tax Withholding Estimator available online. You can then update this amount with your employer by submitting a new Form W-4, Employee’s Withholding Certificate.

Make Estimated Tax Payments

Estimated payments are due on June 15th, September 15th and January 15th of each year. We can make these payments for you, or you may do so electronically on the IRS website.

Premier CPA Services 10 year anniversary logo

May 31 was the 10-Year Anniversary of Premier CPA Services! Over the next few months, we will be offering some great giveaways to our clients and Facebook friends to celebrate! Be sure to follow us and stay tuned!

Yes, We Can Handle Your Bookkeeping

As a business owner, you have more important things to do every day than spend valuable time maintaining your books. Whether you just need some guidance, a bit of QuickBooks training, or complete service from A to Z, we can help. Our services include:

  • Day-to-day entry
  • Bank deposits & reconciling
  • Invoicing & check writing
  • Generating statements
  • Consultations
  • And much more!

Let us take the weight off your shoulders so you can get back to the job of running your business and generating profits. Call us today at (706) 632-7850 for more details.

PPP Loans Temporarily Expanded for Even Smaller Businesses

PPP Loans Temporarily Expanded for Even Smaller Businesses

I f you’re a sole proprietor, independent contractor or owner of a very small business, now’s your time to apply for a Paycheck Protection Program (PPP) loan.

Thanks to a temporary rule change by the Biden Administration, the SBA will ONLY accept applications for PPP loans from firms with fewer than 20 employees during a 2-week priority window: February 24 through March 10, 2021.

While the typical PPP loan is determined by multiplying average monthly payroll costs by 2.5, the updated formula will use gross income instead of payroll costs or net income, meaning you may be eligible for a bigger — forgivable — loan amount.

 

98% of small businesses employ fewer than 20 people, but have received only 45% of PPP so far, according to the SBA.

Also Keep in Mind

1) You can apply for either a first or second PPP loan. To qualify for a second loan, you must have spent or plan to spend all of your first loan, and show you had a 25% or more drop in revenue in any quarter of 2020.

2) The new rules also eliminate some restrictions on small business owners:

  • with prior non-fraud felony convictions;
  • struggling with student loan debt delinquency; and
  • who are non-citizen, U.S. residents with Individual Taxpayer Identification Numbers (ITIN).

Apply Now!

The window on this special program for extra small businesses closes March 10, so hurry and apply soon if you’re interested. Note that other types of businesses can also still apply for a PPP loan before the program expires on March 31, 2021.

Personal Tax Return Paperwork Due March 26

If you have not yet provided us with the documents to complete your individual income tax returns, please do so no later than March 26. If you will not have them ready by then, let us know if you want us to file an extension for you. To help you prepare your files, please download a copy of our 2020 Personal Tax Preparation Checklist.

Support Your Local Restaurant

The last COVID relief law passed temporarily allows a 100% business expense deduction for meals as long as the expense is for food or beverages provided by a restaurant. The previous deduction was limited to 50%. This provision is effective for expenses incurred from January 1, 2021, through December 31, 2022.

2020 Tax Preparation Checklists Now Available

2020 Tax Preparation Checklists Now Available

As promised, we have put together a checklist to help you pull together your tax preparation materials for 2020. With all of the CARES Act, Payment Protection Program loan and other changes to tax law last year, we expect plenty of questions and confusion.

Please click the images below to download a copy of the checklist (personal or business). If you prefer, we can email it to you (just call or email Amber at amber@premiercpaservices.com to request your copy).

2020 Personal Tax Preparation Checklist

 

2020 Business Tax Preparation Checklist

 

Remember: We’re back open on Fridays now to handle the busy tax preparation season. Please contact us with any questions or concerns you may have.

Money Brief: Where’s My Money?

If you have not yet received your second Economic Impact Payment, you can check the status at irs.gov/coronavirus/get-my-payment. Direct deposit began on January 4, with mailed checks following that. You’re eligible for the new stimulus payment of up to $600 for individuals or $1,200 for married couples, and up to $600 for each qualifying child if:

  • You are not claimed as a dependent on someone else’s income tax return.
  • Your adjusted gross income for 2019 is up to $75,000 for individuals or up to $150,000 for married couples filing jointly and surviving spouses (payments are reduced or eliminated for filers with income above those amounts).

EIPs are an advance payment of the Recovery Rebate Credit, which will appear on the 2020 Form 1040 or Form 1040-SR.If you have not received your full payment by the time you file your 2020 tax return, you may claim the Recovery Rebate Credit on your tax return. The credit is figured like the Economic Impact Payment, except that the credit eligibility and the credit amount are based on the 2020 tax year information, including income.

Money Brief: 501(c)(4) Applications

The IRS is requesting organizations that want to file Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4), to file electronically. This will make the application easier to complete and reduce errors, while shortening IRS processing time. The required user fee for Form 1024 is $600, which can be paid fee through pay.gov/public/home.

Money Brief: Tax Filing Season Begins Feb. 12

The IRS will begin accepting and processing 2020 tax year returns no sooner than February 12, 2021. The February 12 start date allows the IRS time for programming and testing following the recent tax law changes. The IRS urges taxpayers to file electronically with direct deposit to speed processing and refunds — nine out of 10 taxpayers should receive their refund within 21 days of when they file electronically with direct deposit (assuming no issues).

Money Brief: Feb. 1 Deadline for W-2s

If you are an employer, you must file Form W-2s and other wage statements by Monday, February 1, 2021. This is also the date Form W-2s are due to employees. Form 1099-MISC, Miscellaneous Income and Form 1099-NEC, Nonemployee Compensation, are also due to recipients on February 1, 2021. E-file is the quickest, most accurate and convenient way to file these forms. If we are filing these forms for you, please get your information to us ASAP.

Money Brief: UGA Business Webinars

Register today for one of UGA’s upcoming webinars discussing the new SBA funding programs. Discussions will include updates and changes to the new PPP, the Targeted EIDL advance, the SBA Debt Relief Program, and the Shuttered Venue Operators Grant program, among others.