Quantum Tax Strategies, Inc.

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Could this Spell the Death of Wealth as We Know It?

In her first major policy speech, Vice President Harris announced a plan to lower housing costs that will be funded by using Senator Warren's American Housing and Economic Mobility Act of 2024. The revenue raisers in Warren's Mobility Act represent a radial reconfiguration of the transfer tax system, and should the Democrats hit the "Trifecta" in the falls election, there may not be time to prepare clients for the best decisions in actions both now and in 2025. Whether you're an attorney, financial advisor, CPA or other estate planning professional, it's critical that you know how these proposals will radically change the planning techniques that you've traditionally implemented for clients.

Reduce the exclusion to $3,500,000 and increase the estate tax rates to 55%, 60% and 65%

Implement a 10% surtax on estates over $1billion

Require GRATs to have a 10-year life and have a remainder interest equal to or greater than 10% of the value of the assets transferred to the trust

Add new code section section 2901 would essentially end the use of new grantor trusts

Impose the generation skipping transfer tax on transfers to anyone three generations below the transferor of the trust. Reduce the $18,000 annual exclusion to $10,000 per person and limit the total amount of annual exclusion gifts to $20,000 per donor

Add new code section 2705(a) that would limit discounts by reason of family control and section 2705(b) would limit the discount on the transfer of non-business assets

Understanding the Home Gain Exclusion
When is a tax planning session essential?

One of the biggest tax benefits available today is the exclusion of gains when you sell your qualified home. Here is what you need to know.

The tax benefit explained

For those who qualify, a married couple can exclude up to $500,000 ($250,000 for unmarried taxpayers) in capital gains from the sale of your principal residence. This exclusion can be taken once every two years as long as you pass two tests; a two-years out of five residency test and an ownership test before you sell the property.

Special situations can cause complications

Often tax planning is required to ensure you maximize this tax benefit. Here are some situations that require a review prior to selling your home.

Ownership and principal residency tests met using different years. As long as the two-year requirement is met for both tests you can take the deduction. It does not matter that you use different years for each test. The most common example of this occurs when you rent a home or condo and then buy it later.

Life events complicate things. Marriage, divorce, and death are common life-events that require planning to maximize the gain exclusion tax benefit. For example, you can take advantage of the full $500,000 gain exclusion after the death of a spouse, but usually only during the time you are able to file a joint tax return.

Selling a second home requires planning. While you can use the gain exclusion every two years, you need to be careful with a second home. You may be able to plan your living arrangements to make each home a primary residence during different tax years to meet the two-year requirement for both properties. This means you need to determine your primary residence each year with good record keeping in case you are audited.

Business use of your home. You will need to adjust your home basis (cost) for any business activity and depreciation of your home. This can create a depreciation recapture tax event when you sell your home.

A partial gain exemption is possible. There are exceptions to the two-year tests when certain events occur. The normal exceptions include a required move for work, health reasons, or unforeseen circumstances. Since the IRS definition of each is vague, you should review your options if you are required to move.

Record keeping matters. Be prepared to document the gain on your property and how you meet the residency and ownership tests. Please keep all documents relating to the purchase and sale of your property. Save any receipts that document improvements to your home. Also keep an accurate record to support your claim of principal residence if you own a second home.

Given the potential for tax savings, please ask for help before selling your home or vacation property.

Because of many home-related tax changes over the years, it can easily confuse taxpayers on what, when and how much can be used to qualify for a home mortgage related deduction. So when your mortgage company reports tax-related information to you and the IRS using Form 1098, it no longer means all the interest and points reported on these statements are tax deductible. Here is what you need to remember:

Mortgage interest deductions loan amount limits. For mortgages starting on or after Dec. 15, 2017, you can deduct interest on up to $750,000 of the loan (it is $1 million for mortgages initiated before Dec. 15, 2017). If your original mortgage is above the threshold, a calculation will have to be done to determine the deductible amount of interest. You can’t simply deduct the full amount of interest being reported on your Form 1098.
Proceeds not used to buy a home add complexity. Proceeds from home equity debt that are not used to build, buy, or substantially improve a qualified home are not tax deductible. This includes mortgage or home equity proceeds used to pay for college expenses, debit consolidation, or other purposes. Mortgage companies issuing these loans will still send you a Form 1098, but it’s up to you to prove how you use the funds during the current year and any prior year.
Mortgage points requires review of settlement statements. Points are paid as a way to obtain a lower interest rate. Generally, points are deductible in the year they are paid, but they have more restrictions than mortgage interest. Points paid to refinance an existing mortgage, for example, may need to be deducted over the life of the loan. If you bought or refinanced a home this past year, a review of your mortgage settlement statement may be required to ensure proper tax treatment of the cost of your points.
Mortgage insurance premiums are not deductible. If you pay mortgage insurance, your mortgage insurance premiums are not deductible. This on again, off again deduction is now in the off position.
With the rise in interest rates over the past several years, more taxpayers will be itemizing their deductions due to mortgage interest. So for each Form 1098 you receive, make a note on the form to explain what the loan is for to ensure a proper deduction.

Now the painting starts! Thank you, Classic Design!

Bathrooms remodeled!! Thank you Villinger Nicholls Development Company, Inc!

Remodel of the office is in full swing! Bathrooms check!

FROM FOX BUSINESS NEWS. WITH THE FED RAISING INTEREST RATES AND IS EXPECTED TO RAISE RATES AGAIN IN JULY HERE IS WHAT SHOULD YOU BE DOING.

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All of us at Quantum Tax Strategies are excited!
Big changes are on the horizon! Stay tuned!

Quantum Tax Strategies, Inc. updated their website address.

We have all the same great people as Tony, including Mr. Zupo, and we wish to welcome JoAnne Mounce to our family of Employees!

We are excited to announce the acquisition of Antone Zupo Accountancy Corporation.

Quantum Tax Strategies, Inc. updated their business hours.

Quantum Tax Strategies, Inc. updated their phone number.