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Self-employment tax: A refresher on how it works
November 20, 2024
Categories: Medicare, Scorp, Self Employment, Social Security
If you own a growing, unincorporated small business, you may be concerned about high self-employment (SE) tax bills. The SE tax is how Social Security and Medicare taxes are collected from self-employed individuals like you. SE tax basics The maximum 15.3% SE tax rate hits the first $168,600 of your 2024 net SE income. The 15.3% rate is comprised of the 12.4% rate for the Social Security tax component plus the 2.9% rate for the Medicare tax component. For 2025, the maximum 15.3% SE tax rate
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Unlocking the mystery of taxes on employer-issued nonqualified stock options
November 19, 2024
Categories: Nonqualified Stock Options, NQSO, Stock Options
Employee stock options remain a potentially valuable asset for employees who receive them. For example, many Silicon Valley millionaires got rich (or semi-rich) from exercising stock options when they worked for start-up companies or fast-growing enterprises. We’ll explain what you need to know about the federal income and employment tax rules for employer-issued nonqualified stock options (NQSOs). Tax planning objectives You’ll eventually sell shares you acquire by exercising
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The amount you and your employees can save for retirement is going up slightly in 2025
November 12, 2024
Categories: 401(k), 403(b), 457 plan, inflation, IRA, Retirement, Secure2.0, SEP-IRA, Simple IRA, thrift savings plan
How much can you and your employees contribute to your 401(k)s or other retirement plans next year? In Notice 2024-80, the IRS recently announced cost-of-living adjustments that apply to the dollar limitations for retirement plans, as well as other qualified plans, for 2025. With inflation easing, the amounts aren’t increasing as much as in recent years. 401(k) plans The 2025 contribution limit for employees who participate in 401(k) plans will increase to $23,500 (up from $23,000 in
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The nanny tax: What household employers need to know
November 7, 2024
Categories: FICA tax, FUTA tax, nanny tax
Hiring household help, whether you employ a nanny, housekeeper or gardener, can significantly ease the burden of childcare and daily chores. However, as a household employer, it’s critical to understand your tax obligations, commonly called the “nanny tax.” If you hire a household employee who isn’t an independent contractor, you may be liable for federal income tax and other taxes (including state tax obligations). If you employ a household worker, you aren’t required
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From flights to meals: A guide to business travel tax deductions
November 5, 2024
Categories: Deductions, expenses, tax deduction, Travel
As a business owner, you may travel to visit customers, attend conferences, check on vendors and for other purposes. Understanding which travel expenses are tax deductible can significantly affect your bottom line. Properly managing travel costs can help ensure compliance and maximize your tax savings. Your tax home Eligible taxpayers can deduct the ordinary and necessary expenses of business travel when away from their “tax homes.” Ordinary means common and accepted in the industry.
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You don’t have to be in business to deduct certain vehicle expenses
October 30, 2024
Categories: mileage, TCJA, Vehicles
When you think about tax deductions for vehicle-related expenses, business driving may come to mind. However, businesses aren’t the only taxpayers that can deduct driving expenses on their returns. Individuals may also be able to deduct them in certain circumstances. Unfortunately, under current law, you may be unable to deduct as much as you could years ago. How the TCJA changed deductions For years before 2018, miles driven for business, moving, medical and charitable purposes were
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How can you build a golden nest egg if you’re self-employed?
October 29, 2024
Categories: Self Employment, SEP-IRA, Small business, solo 401(k)
If you own a small business with no employees (other than your spouse) and want to set up a retirement plan, consider a solo 401(k) plan. This is also an option for self-employed individuals or business owners who wish to upgrade from a SIMPLE IRA or Simplified Employee Pension (SEP) plan. A solo 401(k), also known as an individual 401(k), may offer advantages in terms of contributions, tax savings and investment options. These accounts are geared toward self-employed individuals, including sole
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Maximize your year-end giving with gifts that offer tax benefits
October 24, 2024
Categories: GiftTax
As the end of the year approaches, many people start to think about their finances and tax strategies. One effective way to reduce potential estate taxes and show generosity to loved ones is by giving cash gifts before December 31. Under tax law, you can gift a certain amount each year without incurring gift taxes or requiring a gift tax return. Taking advantage of this rule can help you reduce the size of your taxable estate while benefiting your family and friends. Taxpayers can transfer
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Employers: In 2025, the Social Security wage base is going up
October 22, 2024
Categories: FICA tax, Medicare, Social Security
As we approach 2025, changes are coming to the Social Security wage base. The Social Security Administration recently announced that the wage base for computing Social Security tax will increase to $176,100 for 2025 (up from $168,600 for 2024). Wages and self-employment income above this amount aren’t subject to Social Security tax. If your business has employees, you may need to budget for additional payroll costs, especially if you have many high earners. Social Security basics The
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Is your money-losing activity a hobby or a business?
October 16, 2024
Categories: Small business, TCJA
Let’s say you have an unincorporated sideline activity that you consider a business. Perhaps you offer photography services, create custom artwork or sell handmade items online. Will the IRS agree that your venture is a business, not a hobby? It’s an essential question for tax purposes. If the expenses from an activity exceed the revenues, you have a net loss. You may think you can deduct that loss on your personal federal income tax return with no questions asked. Not so fast! The