Heads Up: Beneficial Ownership Information

Deducting Student Loan Interest: What You Need to Know Eligible taxpayers can deduct interest paid on qualified student loans for an eligible student's educational expenses at a qualified institution. Here’s a breakdown of the key details: Deduction Limits and Income Thresholds The maximum deduction for student loan interest is $2,500 per year. This amount is not adjusted for inflation . For 2024 , the deduction begins to phase out for taxpayers with Modified Adjusted Gross Income (MAGI) above: $75,000 (Single or Head of Household) $155,000 (Married Filing Jointly) The deduction is completely eliminated when MAGI reaches: $90,000 (Single or Head of Household) $185,000 (Married Filing Jointly) Key Details About Student Loan Interest Deductions Above-the-Line Deduction : Student loan interest is an “above-the-line” deduction, meaning you can claim it even if you do not itemize your deductions. Eligible Student : To qualify, the student must be enrolled in a degree, certificate, or recognized educational program, carrying at least half the normal full-time workload during one academic period in the tax year. Dependency Rule : You cannot deduct student loan interest if you are claimed as a dependent on someone else’s tax return. However, students may deduct interest in years after they are no longer dependents. Legal Obligation to Pay The deduction can only be claimed by the person legally obligated to repay the loan. Examples : A parent who co-signed a student loan and is personally liable for the payments can deduct the interest if they make the payments. If a third party (e.g., an employer or parent) makes a payment on behalf of the borrower, the borrower can treat the payment as if they made it and may deduct the interest, provided they are legally responsible for the loan. Important Changes: Home Equity Loans Under the Tax Cuts and Jobs Act (TCJA) , interest on home equity loans is no longer deductible unless the loan is used to buy, build, or substantially improve the home securing the loan. Therefore, using a home equity loan to refinance student debt would not qualify for a deduction. Planning Tip: To maximize your tax benefits, consult with a tax advisor or CPA to evaluate your eligibility for the student loan interest deduction based on your specific financial situation. If you have any questions, contact our office today!

Under the new Tax Cuts & Jobs Act (TCJA), the standard deduction available to taxpayers has increased to $24,000 for those who file as Married filing Jointly, $18,000 for Head of Household, and $12,000 for Single or Married Filing Separately. Due to this increase, it is estimated that the number of taxpayers who itemize their deductions will fall from around 30% to less than 10%. In addition to the standard deduction increase, the TCJA cut, or eliminated, miscellaneous other itemized deductions subject to the 2% income limitation.. Using a bunching strategy can help some taxpayers maximize the effectiveness of items that can be deducted. Bunching, in this case, is accelerating or delaying certain payments into a year where they can take advantage of making an extra payment. With bunching, deductions would be high one year and low the next. For example, someone who normally gives $5,000 to a charity annually, would instead give $10,000 before the end of 2019, while not making any to the charity in 2020. If you were to use the bunching strategy, you would itemize one year and take the standard deduction the next (or vice versa). Some examples of deductions you may want to bunch are: Medical and Dental Expenses State and local taxes (this deduction is now limited to an annual maximum of $10,000) Mortgage and HELOC interest (there are certain restrictions on this deduction as well) Charitable Gifts  Before you start bunching payments, talk to your tax preparer to go over your unique situation.

If you are 70 ½ or older, you are eligible to make a Qualified Charitable Distribution (QCD) from your IRA directly to a qualified charity. By electing to make a QCD, the distribution of these funds will be reported as a distribution and will count toward the required minimum distribution from the IRA, but will not be included in taxable income. This is an advantage for taxpayers who do not need the required minimum distribution to live on and are charitable givers. The advantage in making a QCD is that by having the distribution excluded from taxable income, it may Make less Social Security benefits taxable Allow for a “deemed” deduction even if you take the standard deduction, or if your itemized deductions are limited (the QCD will neither be included in income nor allowed as a deduction). Lower AGI as it relates phase-outs of deductions, exclusions, or tax credits that are limited or lost at certain AGI levels. To make a QCD you must have the distribution sent directly from the IRA (by the trustee) to a qualified charity as defined in IRC Sec. 408(d)(8). Many trustees and custodians have forms in place to handle this distribution. The distribution cannot first be paid out to the beneficiary and then paid to the charity. This action would include the distribution in taxable income and would qualify the amount as a charitable contribution as an itemized deduction. QCDs are limited to taxpayers who are 70 ½ or older at the time of the QCD and are limited to $100,000 per individual per year. They must be made directly from an IRA to the charity and the charity must still provide documentation that would be necessary to make an itemized charitable deduction. Also, the amount of QCD is limited to the amount of the distribution that would otherwise be included in taxable income.  Contact your tax advisor to learn more.

Non-cash contributions are deductible on Federal Schedule A of your personal income tax return as itemized deductions. The documentation required depends on the amount of the donation. For all non-cash contributions, regardless of the fair market value, you will need the following documentation: Name of the Charity/Organization Location/Address of the Charity/Organization Description of the items donated (must be in good or better usable condition) Date of the gift Fair market value at the time of the donation Contributions Exceeding $500 For cumulative non-cash contributions with a fair market value over $500, you must attach Form 8283 to your personal income tax return. Filing this form requires additional details: How the property was obtained (e.g., purchased, gifted, inherited) Date the property was obtained Original cost or adjusted basis of the property Contributions Exceeding $5,000 For cumulative non-cash contributions of similar property with a total value exceeding $5,000: A qualified appraisal is required. The appraisal must be conducted by a qualified appraiser and completed before filing your tax return. You will also need the appraiser's signature and acknowledgment from the charity for this property, attached to Form 8283. Additional Considerations For donations of vehicles, boats, or airplanes**, the rules differ slightly, and specific IRS forms may be required. Taxpayer's Responsibility The burden of proof lies with the taxpayer. Always obtain contemporaneous receipts from the charitable organization and retain any other supporting documentation required. This will ensure compliance with IRS requirements if your return is audited. If you have questions or need help determining how to document or value your non-cash charitable contributions, contact us for personalized assistance.

Since the beginning of time, nothing has been as confusing as the Internal Revenue Code. It started out “all fine and dandy,” but as time marched on it has taken the lead over “parking in driveways and driving on parkways.” A great example of this is the requirement surrounding S-Corporation shareholders and health, dental, and vision insurance. As we approach the end of the year, there is an important, yet confusing requirement. What’s the Deal? If you own 2% or more of an S-Corporation and have heath, dental, and vision insurance, grab some coffee and read on. S-Corporations are similar to partnerships and Limited Liability Companies in a lot of ways, but there are differences. One of the big differences is that S-Corporation owners are required to pay a reasonable wage (we can help with that). This makes it sound like the owner is an employee and should be treated as such. This is where the confusion starts. The IRS says 2% owners are treated as a partner in a partnership with regards to benefits. What Should You Do? If you are a 2% shareholder and the company pays for your health, dental, and vision insurance or the company reimburses you for your these insurances, there are certain steps you must take to ensure your insurance is deductible for tax purposes. Before the end of the year, make sure that the cost of your health, dental and vision insurance is included in your payroll. If your company pays for the insurance, this will be an easier computation than if you pay for your insurance personally. If you pay for your insurance personally, you will need to add up your insurance costs for the entire year. This will include family coverage if you have it. The company will need to reimburse you by the end of the year. Your W-2 and Insurance Now for the fun. The cost of your insurance is included in Box 1 of your W-2. This is the box titled “Wages, tips and other compensation”. Interestingly, Boxes 3 and 5 do not include this amount. Based on this reporting requirement, you may have Federal and State Income Taxes withheld, but you will not pay Social Security or Medicare taxes. I know, I told you that in order for your insurance to be deductible, you had to follow the above steps. If the coffee is working, you are asking yourself how is it a deduction when I just included the cost in Box 1 of my W-2. Yes, you are properly confused. There is one more place the W-2 that needs to be filled out. In Box 14 “Other” there should be a notation of SCORP 2% (or something like that to signify 2% owner insurance) and the cost of your insurance listed. This entry in and of itself does not remove the taxability of Box 1, but gives the information to “get you there.” When you complete your personal tax return, you will include Box 1 of your W-2 on the line for wages. On a separate schedule (for 2019 it was Schedule 1 Part II Line 16) you will list the amount in Box 14 of your W-2. This will deduct the cost of your insurance from your income. The 3-Step Process So what should have been a simple deduction, has resulted in a three-step process. First, the company must pay directly or reimburse you for the insurance. Second, the company includes this cost in your W-2 (the company gets a deduction for “wages”). Third, you report the wages, but also the deduction on your personal return. If you notice there are two deductions (company deducts insurance as wages and you take a deduction on your return) and one income (insurance as wages on your W-2) thus resulting in you eventually getting a deduction. The Bottom Line Why did the IRS make it so confusing, I don’t know. I do know that if you want to deduct your insurance you better follow the above steps. If the above is confusing, give us a call. We strive to make the complex, simple, and are glad to help.  Holden Moss CPAs is dedicated to aiding businesses in this difficult time. We will provide you with all the tools and information necessary to succeed. If you have any questions regarding your W-2 in regard to insurance please give us a call at (919) 556-6216. Contact us via email at admin@holdenmoss.com . We look forward to bettering your business.

Planning for the future is essential, no matter where you are in your financial journey. At Holden Moss CPAs, our financial planners specialize in helping you create a clear and realistic picture of your finances, identify your goals, and uncover potential gaps in your financial strategy. Start today by downloading your Personal Finance Scorecard and gain valuable insights into your financial health. How to Use the Personal Finance Scorecard Review Each Question Thoroughly: For every question, mark "yes" to earn a point. If you answer "no" or feel uncertain, assign yourself a 0. This approach helps you pinpoint areas where you can improve. Analyze Your Score with a Professional: After completing each category, collaborate with a Holden Moss CPA financial planner. Together, we’ll create a step-by-step plan to strengthen your finances and improve your score. Stay on Track with Annual Reviews Life changes, and so do your financial needs. That’s why we recommend reviewing your scorecard with us annually. By setting up a regular appointment, you can monitor your progress, address new concerns, and stay aligned with your goals. Trusted Tools Backed by the AICPA This scorecard was developed by the AICPA’s Personal Financial Planning (PFP) Division and is designed to help you assess and enhance your financial wellness. As a member of the AICPA, we have access to an extensive library of resources, like this scorecard, to guide our valued clients on the path to financial success. All information included in this article was sourced directly from AICPA.org .

Is your work/personal life in balance? Getting that ratio right is a big deal when you’re a busy owner. It’s very easy, as the business owner, to get sucked into a vortex of running your business effectively where it takes up every minute of your waking day – at the detriment of your personal life, your relationships and even your health. It’s an issue that’s relevant to most owner-managed businesses – and it’s incredibly easy to fall down the rabbit hole and (unlike Alice in Wonderland) to not come out the other side. So how do you avoid falling down this rabbit hole? Maintaining your quality of professional life When you’re an owner-manager, it’s vital that you can maintain a positive ‘quality of professional life’ (QOPL). If you’re keeping your professional life balanced effectively against your personal life then you’ll be happier, more fulfilled and (ultimately) a more effective leader. So making a determined effort to improve your QOPL is a big part of looking after yourself and your business. One particularly effective way to control your QOPL is to use a personal scorecard. The personal scorecard approach lets you set a series of questions relating to your personal wellbeing, which you then answer on a daily to determine how well you’re meeting your personal goals. Doing this daily will almost always ensure success at changing to our desired behavior. This personal scorecard approach works well with managers and team members, but the most important place to start is with yourself – the CEO or business owner. A personal scorecard keeps you focused on what’s important to you, instead of allowing you to be blown by the various winds and currents of your business. It helps you to stick true to your course and sail forward to your intended destination. The items on your scorecard definitely don’t have to be focused on business matters. What’s important here is to pose questions that drive the right behavior and keep you on track with meeting those personal objectives. For example, you could be asking the following kinds of question: Have I pushed myself to find one morning every week to go for a run or do something healthy? Have I done my best to take time out each day to spend quality time with my family? Have I proactively managed my day so there’s enough free time to read a good book this week? What you choose and prioritize will be unique to you and your personal goals and core values. But the simple act of asking the question begins a process of measuring your performance on these personal goals, and proactively acting on your own advice and changing your behavior. Passive vs active questions When setting the questions for your personal scorecard, it’s imperative that you know the difference between passive and active questions. An example of passive questions could be ‘Am I grateful for what I have?’ or ‘Have I been mindful of my choices today?’ A passive question allows you to get away with just answering ‘Yes’ or ‘No’ to the question, with no accounting for anything else following that answer. You give an affirmative answer and move on. An example of an active question could be ‘Did I do my best to be grateful for what I have?’. That’s not a straight yes/no question – there’s an element of quality to the answer you give. If you’re a workaholic, asking the question ‘Did I do my best to plan some form of adventure or social activity outside work this week?’ won’t just get a yes/no answer – it requires deliberation, thought and review; and, ultimately, will push you to do better. Asking yourself these active questions on a regular basis will trigger certain responses, certain changes in behavior and certain improvements in your QOPL score. In short, it makes you proactive about your own development. The triggers are what move you from being passive about your progress against personal goals to being active – something that Marshall Goldsmith identified in his excellent book Triggers: Creating Behavior That Lasts, Becoming The Person You Want To Be . Marshall Goldsmith really is the #1 personal coach in the US, if not in the world. He’s specialized for many years in this area of persona coaching and has helped countless people to improve their QOPL balance and find a better way of living and working. If you feel like your work/life balance is uneven, I’d heartily recommend reading the Triggers book and picking up on the concepts he talks about. Don’t just plan; make sure you also do Human being are great planners, but human beings are also the worst at actually doing. We plan, but we don’t do the things we’ve put into our plans. And when you’re trying to improve your QOPL that can be a real problem. That’s why you need a personal scorecard: something to keep you focused and a means to drive your motivation to be doing the right things and not just sitting around planning and theorizing. It’s your ‘personal conscience’ that is always there, checking that you’re meeting your own standards and taking the right steps forward. The power of personal scorecards for your team The personal scorecard is an amazing driver for you as a business owner. But imagine the power of creating a business-driven version of the scorecard and giving this to your managers and team members. Immediately, you take business planning and management from being a theoretical idea and make it into a clear, actionable set of drivers. So, for example, a question you could ask one of your team members is ‘What kind of training do you think you need to do your job better?’ and to then add that training into their personal scorecard and development program. Maybe you have a team member who is rather abrupt with colleagues and customers and where they need to work on improving that behavior. So, on their personal scorecard, you may have a question that says ‘Did you do your best to be polite and open, rather than abrupt, when dealing with people today?’ It pushes the right behaviors, allows you to monitor change over time and provides clear goals to the people on your team – all benefits that will ultimately profit their careers, their personal happiness and the long-term success of your team. Start being proactive about your quality of life The personal scorecard is an extremely effective tool in your business toolkit. By putting scorecards in place you and your team, you can help everyone to improve that all-important work/life balance and also lead by example by maintaining a positive QOPL as the business owner. Our goal here at Holden Moss is always to look at owner-managed businesses in a holistic manner – looking at the personal goals of you, the owner, alongside the strategic and growth objectives of your company. If you’d like to improve your work/life balance, please do come and talk to us and let us help you get your own personal scorecard in lace.  Contact your local Holden Moss office to arrange an appointment and begin your journey to a more fulfilling balance between your business and your personal life.

Knowing the true health of your business is crucial if you’re looking to make any big decisions about the future growth of your company. Is your business currently on life support? Or are you thriving and meeting your profit targets? We’ve already talked about measuring your acceptable level of profit (ALP) and how you need to set a minimum level of profit for your business. And this ALP can be a critical element when you’re scenario planning and asking the ‘What if…?’ questions about the future success of the company. Knowing your minimum acceptable level of profit Keeping on top of your profitability is a fundamental part of keeping your business on track and meeting its goals. You need to agree on your minimum profit level, measure your profit numbers over time and see where you stand as far as your percentages go. Are you achieving that minimum acceptable level? And where is your business on the scale of success? Life support – there’s no money in the bank and you’re about to flatline. Survival – you’re covering your costs, but not making the profit you want. Thriving – you’re meeting your profit target and seeing growth. Wherever you fall on the scale, there are ways to improve. But you need to have a focus on profit improvement at the center of the business to truly achieve greatness. Feed your ALP into your decision-making Pinning down your ALP doesn’t just give you a profit target to aim for. It also gives you an incredibly useful variable that can be plugged into your forecasting and decision-making processes. Whenever you’re going to make a business decision, you can plug the numbers into your decision-making model and see what the effect will be on your acceptable level of profit (ALP) before you make your final decision. And that’s an exceptionally powerful tool to have at your disposal when you’re about to make a big purchase, enter into a business deal, or make a decision that affects the long-term outlook for the company. Always make your business decisions once you’ve looked at the potential impact on your ALP – only then can you make an informed decision Moving offices – maybe you’re looking to move to bigger offices and want to know how the increased rent will impact your ALP. Increase the size of your team – perhaps you need more people to help you handle your workload and want to calculate the effect of your increased payroll costs on profits. Buying a company car or truck for the business – you could be looking to invest in a car, or a bigger truck, to help you become more efficient, and want to know how this outlay could eat into your profit. Whatever the next step is for your company, your ALP will be a critical element to consider – and when you know the potential outcomes it allows you to pivot, evolve and rethink your plans to preserve those precious profits. Invest your profits back into the business Typically, a business will end up at the close of the year with a certain amount of profit – let’s say $50,000 of profit, as a rough example. And the typical mindset at this point is very much around how you can reduce the tax you pay on this $50k – the owner will be thinking ‘What can I do to get this profit number down and pay less in tax?’. But that’s a fundamental misconception that many business owners hold. What you need to do is not look at ways to reduce that profit number, but ways to reinvest your profits back into the business. How does that work in practice? The answer is to look at the needs of the business and to use your profits to secure long-term value, rather than a short-term cash distribution to yourself. Invest in your assets – if you do need a bigger truck to speed up deliveries for your business, reinvest your profit into buying this vehicle and keep the capital in the business by investing in your assets (the truck). Clear your debts – rather than paying yourself a big sum from your annual distributions, why not pay down the outstanding debts that are in the business. The possibilities are endless and will be driven by the needs of your particular company. But the key is to do something with these profits that are going to benefit the long-term success of the business, not just to reduce that tax bill. Listen to the angel on your shoulder Successful decision-making is about using the information you have at your fingertips and reaching an outcome that’s informed, long-term, and – crucially – maintains your minimum level of acceptable profit. It’s about ignoring the emotional, greedy devil on your shoulder and listening to the practical, forward-thinking angel who’s sitting on the other arm. Look at the numbers, use your head and make decisions that will help you thrive in the long run.  If you want to know more about controlling your profit levels and making great decisions for your business, come and talk to us. We’d love to help you improve your profits and help you grow.

The IRS has rules that limit the deductibility of expenses and losses from a hobby or activity not engaged in for profit. If the IRS determines that an activity is not profit-driven, deductions from the activity are limited to the amount of income the activity generates. Losses from such activities cannot be used to offset other income, such as salary or investments. In being able to deduct a net loss from a business - whether it is a business that normally has ups and downs or one in which the unexpected might occur - you must be prepared to show that an activity that generates deductions is a business from which you intend to profit. It is not necessary that the activity actually earns a profit, so long as a profit is one of the motives for participating in the activity. The IRS assumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year, or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses. Otherwise, the IRS applies non-exclusive tests and factors to the surrounding facts to judge whether activities are more like a business with a profit motive, or are for personal satisfaction. Under IRS rules and judicial precedent, the following nine factors are considered in determining whether an activity is engaged in for profit: 1. the manner in which the taxpayer carries on the activity; 2. the expertise or experience of the taxpayer's advisors; 3. the time and effort the taxpayer expends on the activity; 4. the expectation that the assets used in the activity may appreciate in value; 5. the success of the taxpayer in carrying on other similar or dissimilar activities; 6. the taxpayer's history of losses from the activity; 7. the amount of occasional profits earned from the activity; 8. the taxpayer's financial status; and 9. the elements of personal pleasure or recreation derived from the activity. These factors are not exclusive in determining a profit motive, and if the circumstances warrant, are not given any weight. To make sure you are properly claiming all of the deductions available to you, and to strengthen your position in the event of an IRS audit, it is important to consider all the facts and circumstances surrounding activities the IRS is likely to challenge.  If you would like assistance in documenting the for-profit characteristics of your activity, please call our office at your earliest convenience to arrange an appointment.