Ted Bauman Advice on Saving Money Under the New Tax Law

The United States Congress and President Trump gave the United States a Christmas present in December 2017 by passing the first major new tax law in many years. Many provisions of the new law affect primarily individuals. However, some of them affect the taxes of businesses. One of those was eliminating the ability of businesses to avoid capital gains taxes by making exchanges of physical assets under 1031. Effective January 1, 2018, only exchanges of real estate property are allowed under 1031. Therefore, financial expert adviser Bauman recommenced businesses making exchanges of physical equipment to finish those exchanges before calendar year 2018 began.

Another tax tip Bauman gave applies to single person businesses, especially those people who work out of their homes. Most of these businesses are sole proprietorships. However, Bauman says they can save money by forming limited liability companies. LLCs do function as pass-through entities if they’re owned by just one person. The business owners must still complete a Schedule C to calculate their business net income and a Schedule CE to calculate the Social Security taxes they owe. Those figures are carried forward to the appropriate lines on the 1040. IRS regulations allow these businesses to take various deductions that result in lower income, and, therefore, lower taxes. Check this article at Bloomberg.com for more information.

The new tax law that went into effect January 1, 2018 raised the standard deduction. Many experts expect that from 2018 on, most taxpayers will not benefit from itemizing deductions. That’s why Bauman advised those people to qualify for as many of those deductions as possible in December 2017 by paying mortgage interest and property taxes, student loan interest and medical services payments in 2017. For the same reason, he recommended people make their 2018 charitable donations in 2017 instead. People who live in states with high taxes such as California and New York could benefit from receiving more income from 2017 instead of 2018. This obviously increased how much state income taxes they will have to pay in April 2018, but that money is deductible from their 2017 federal taxes. Therefore, they still save money. That strategy does not apply to people who live in states with low tax rates.

Ted Bauman has made a lifelong career helping people retain their privacy from government intrusions on their freedom. As a young man, he emigrated from the United States to South Africa. During his career in South Africa, he served as executive to several nonprofit organizations.

Learn more:https://seekingalpha.com/user/48547799/comments